October 19, 2026 | By Jarrett Hunter, Toronto Realtor®

Just as many Canadians were hoping borrowing costs might begin moving lower, the latest inflation numbers are providing another reason for caution.

Statistics Canada reported that the annual inflation rate increased to 3.1% in September, up from 3.0% in August. That puts inflation just above the Bank of Canada’s target range of 1% to 3%.

For homeowners approaching a mortgage renewal and buyers considering a purchase, the question is whether these numbers could affect interest rates over the coming months.

What’s Driving Inflation Higher?

Much of September’s increase was attributable to energy prices. Gasoline prices rose 27.8% compared with a year earlier, reflecting significantly higher oil prices.

When gasoline is excluded, inflation actually slowed to 2.2%, down from 2.4% in August.

Housing-related inflation also tells an interesting story. Statistics Canada reported that shelter costs increased 1.8% year over year, while rents rose 2.8%. These are considerably more moderate increases than Canadians experienced during some earlier periods.

That distinction matters because the Bank of Canada considers more than just the headline inflation number when evaluating monetary policy.

What Could This Mean for Mortgage Rates?

The Bank of Canada’s next interest rate announcement is scheduled for October 28, 2026. Its policy rate currently stands at 2.25%.

Higher inflation can make the Bank more cautious about reducing interest rates and, if price pressures become persistent, could increase the likelihood of future rate increases.

However, the Bank will also consider employment, economic growth and whether inflation is spreading beyond energy costs.

It’s important to remember that variable and fixed mortgage rates don’t necessarily move together. Variable rates are generally linked to lenders’ prime rates, which tend to respond to Bank of Canada policy changes. Fixed mortgage rates are more closely influenced by bond yields and broader financial market expectations.

In other words, even if the Bank leaves its policy rate unchanged, available fixed mortgage rates can still move.

What Should Toronto Buyers and Homeowners Be Doing?

For buyers, I would focus on affordability using current mortgage rates rather than making a purchasing decision based on the hope that rates will fall.

The same applies to homeowners approaching renewal. Reviewing available terms, speaking with your lender or mortgage broker and understanding the potential impact of different rates can help avoid surprises.

For those considering selling, mortgage costs remain an important part of the affordability equation for prospective purchasers. Buyers are looking at the complete monthly cost of owning a property, including taxes, maintenance fees and utilities, not simply the asking price.

Sources: Statistics Canada — September 2026 Consumer Price Index and Bank of Canada — September Policy Rate Announcement.

Jarrett Hunter | Realtor® | RE/MAX Your Community Realty