Key Takeaways
- The Bank of Canada policy rate stands at 2.25% as of September 24, 2026
- The five-year posted mortgage rate at major banks is 6.09% as of September 23, 2026, though most borrowers negotiate below this figure
- Variable-rate mortgage holders benefit directly when the policy rate changes, while fixed-rate holders see the impact only at renewal
- The overnight repo rate average sits at 2.30% as of September 24, 2026, reflecting the policy rate in short-term borrowing markets
- Buyers considering variable versus fixed mortgages face a choice between immediate rate changes and locked-in certainty
What the Policy Rate Does
The Bank of Canada sets the target for the overnight rate, which is the interest rate at which major financial institutions lend to one another for one day. As of September 24, 2026, that target sits at 2.25%. This is the benchmark that influences what banks charge consumers for variable-rate mortgages, lines of credit and other floating-rate products.
When the Bank moves this rate, variable-rate mortgage holders see their interest costs change within days. The Canadian Overnight Repo Rate Average, a measure of what banks actually pay to borrow overnight, stood at 2.30% on September 24, 2026, tracking closely with the policy target.
Fixed-rate mortgages do not move with the policy rate during the term. Instead, fixed rates are priced off longer-term bond yields and reflect what lenders expect rates to do over the next several years. The five-year posted rate at the six major chartered banks was 6.09% as of September 23, 2026. That posted figure is a starting point; most borrowers negotiate a rate below it, but there is no standard discount and the final rate depends on the lender, the buyer's credit profile, the down payment and the property.
What It Means for Variable-Rate Mortgage Holders
If you hold a variable-rate mortgage, your interest cost is tied to the prime rate at your lender, which in turn follows the Bank of Canada policy rate. When the Bank adjusts the overnight rate, prime typically moves by the same amount within a day or two.
At a policy rate of 2.25%, variable-rate holders are paying interest based on a prime rate that reflects this level. Your actual rate is prime plus or minus a spread that was set when you signed your mortgage contract. That spread does not change, but the prime rate does.
Variable-rate mortgages come in two forms. With an adjustable-rate mortgage, your payment changes when prime changes, so you pay more or less interest each month but the amortization stays on track. With a fixed-payment variable-rate mortgage, your payment stays the same but the split between principal and interest shifts; if rates rise enough, you may pay only interest or even trigger a payment adjustment.
Right now, variable-rate holders are benefiting from a policy rate that has come down from higher levels. Each quarter-point cut in the policy rate reduces the interest portion of your payment or allows more of each payment to go toward principal, depending on your mortgage structure.
What It Means for Fixed-Rate Mortgage Holders and Renewals
If you locked in a fixed rate one, two or three years ago when rates were higher, you do not benefit from the current 2.25% policy rate until your term ends and you renew. At renewal, you will negotiate a new rate based on conditions at that time.
The five-year posted rate of 6.09% as of September 23, 2026 is not what most borrowers pay. Lenders offer discounts off the posted rate, and the size of the discount varies. A buyer with a strong credit score, a large down payment and a property that appraises well will negotiate a lower rate than the posted figure. The exact rate depends on the lender's appetite, the competitive environment and your financial profile.
If you are renewing in the coming months, you will be comparing fixed and variable options. A variable rate will move with the policy rate, so if the Bank of Canada cuts further, you benefit immediately. A fixed rate locks in certainty but does not change if the policy rate drops.
What It Means for Buyers Choosing Between Variable and Fixed
First-time buyers and move-up buyers face the same choice: lock in a fixed rate for predictability, or take a variable rate and accept that your cost will change with the Bank of Canada's decisions.
A variable rate is lower than a fixed rate most of the time, because you are taking on interest-rate risk and lenders price that in. If the Bank of Canada holds the policy rate steady or cuts further, variable-rate holders pay less interest over time. If the Bank raises rates, variable-rate holders pay more.
A fixed rate costs more upfront in exchange for certainty. You know exactly what your interest cost will be for the term, and your payment will not change unless you have a fixed-payment variable product. Fixed rates are priced off bond yields, which reflect market expectations about future policy rates, inflation and economic growth. The five-year posted rate of 6.09% as of September 23, 2026 is the starting point for negotiation, not the final rate.
The decision depends on your tolerance for payment changes and your view of where rates are headed. If you believe the Bank of Canada will hold or cut further, a variable rate saves money. If you want payment stability and are willing to pay for it, a fixed rate delivers that.
What It Means for Sellers
The policy rate affects how much buyers can borrow, which in turn affects how much they can pay for your home. When the Bank of Canada lowers the policy rate, variable-rate mortgage holders see their payments drop or their principal repayment accelerate, freeing up room in their budget. Buyers qualifying for a new mortgage see lower interest costs, which can increase the purchase price they can afford under the stress test.
The stress test requires buyers to qualify at the greater of their contract rate plus two percentage points, or the five-year posted rate. With the posted rate at 6.09% as of September 23, 2026, most buyers qualify at that level regardless of whether they choose variable or fixed. A lower policy rate does not change the stress test directly, but it does mean that buyers who pass the test will have lower actual payments, leaving more room for other costs or a larger mortgage.
Sellers benefit indirectly when borrowing costs fall, because the pool of qualified buyers grows and the amount each buyer can afford rises. The effect is not immediate and depends on local supply, demand and economic conditions, but lower rates generally support prices over time.
Outlook
The Bank of Canada adjusts the policy rate eight times a year on a published schedule. The next decision will reflect incoming data on inflation, employment, consumer spending and housing activity. The Bank does not pre-commit to a path, and each decision is made meeting by meeting.
Borrowers and buyers should plan for a range of outcomes. The policy rate may hold steady, move lower or reverse direction if inflation or growth surprises. Variable-rate holders will see any change reflected in their interest costs within days. Fixed-rate holders and buyers locking in a term will not be affected until renewal.
If you are buying, renewing or considering a refinance, compare the rates and terms available from multiple lenders. The posted rate is a starting point, not the final offer, and the difference between lenders can be significant. If you are weighing variable versus fixed, consider your budget, your risk tolerance and how long you plan to hold the mortgage.
Renanza Realty works with buyers and sellers across Canada. If you are planning a purchase or listing and want to understand how current rates affect your options, reach out to our team for a no-obligation conversation. We can walk through the numbers, explain what you qualify for and help you make a decision that fits your goals.
Sources
- Bank of Canada, Target for the overnight rate, September 24, 2026
- Bank of Canada, Conventional mortgage, 5-year posted rate, September 23, 2026
- Bank of Canada, Canadian Overnight Repo Rate Average (CORRA), September 24, 2026
Data last checked: 2026-09-24
