How Bond Yields Affect Mortgage Rates in Canada

Fixed mortgage rates in Canada follow the bond market more closely than they follow the Bank of Canada. “Canadian fixed-rate mortgages are generally benchmarked off 5-year government bond yields,” as a Bank of Canada speech on the mortgage market put it. This page, part of the guide to mortgage rates in Canada, shows where that yield is, how far mortgage rates have sat above it, and what moves it.

Fixed and variable rates follow different benchmarks

Bond yield: Bank of Canada series BD.CDN.5YR.DQ.YLD. Policy rate: series V39079. Prime: series V80691311.

Because the benchmarks differ, fixed and variable rates can move at different times and by different amounts. The policy rate changes only when the Bank announces a decision; the 5-year yield changes every trading day. How the Bank’s decisions reach variable rates is on the policy rate page, and the prime rate page covers prime itself.

Why fixed rates follow the 5-year yield

A 5-year Government of Canada bond pays a fixed return for five years; that return is its yield. A lender that commits to a rate for five years prices it against what money for the same term costs in the market, and the government’s yield is the base rate for that term. The Bank of Canada describes the link in its explainer on quantitative easing: government bond yields “have a big influence on other borrowing rates,” and if the Bank buys five-year government bonds, lowering their yield, “this would be reflected in lower interest rates on five-year fixed-rate mortgages.”

The rate a borrower pays sits above the yield. The gap, or spread, is what the lender adds on top of the government rate for its own costs, its risks and its margin, and it changes over time, as the next section shows.

How wide the gap has been

The Bank of Canada publishes the average rate on the mortgage funds chartered banks advance each month (not the posted rate), which counts new loans, renewals and refinancing. For uninsured mortgages fixed for 5 years or more, the gap to that month’s average 5-year yield from 2013-01 to 2026-06 was:

Computed from Bank of Canada series V122667786 (funds advanced, uninsured residential mortgages, fixed 5 years and over; includes renewals and refinancing) and BD.CDN.5YR.DQ.YLD (monthly average of daily closes).

Year by year:

Bank of Canada series BD.CDN.5YR.DQ.YLD and V122667786, computed 2026-09-25. The 5-year bond yield page has yearly yields for recent years and yield ranges back to 2001.

Reading today’s yield as a fixed-rate guide

Adding the spread to the yield gives a rough range for where new fixed rates sit, not a quote. As an illustration, the latest 5-year close plus the narrowest and widest yearly average gaps in the Bank’s monthly data, which starts before the table above:

For comparison, the Bank of Canada’s monthly average for uninsured mortgages fixed 5 years or more that chartered banks funded was 4.49% in July 2026, and 4.05% for insured ones. The chartered banks’ posted 5-year rate (series V80691335) was 6.09% on September 30, 2026; a posted rate is the bank’s listed rate, not the average rate borrowers were advanced. The 5-year fixed rate page explains posted and offered rates and how to compare them.

What moves the 5-year yield

The yield is set by trading in government bonds, so it moves on what investors expect rather than on any single announcement. The Bank of Canada’s recent reports point to these forces:

• Expectations for the policy rate. A 5-year bond competes with five years of rolling over short-term deposits, so expected Bank of Canada decisions feed into it. In its July 2026 Monetary Policy Report, the Bank noted that in the United States, “sovereign bond yields and market pricing for the policy rate have increased,” while in Canada “yields are little changed on net.”
• Global bond markets. Canadian yields move with yields abroad: at its September 2, 2026 announcement the Bank noted that long-term bond yields had moved up globally, including in Canada. The largest outside influence is the US market, covered on the US Federal Reserve page.
• Government borrowing. Among the risks in the same report, the Bank wrote that long-term government bond yields “could rise if investors demand greater compensation because of the rapid rise in sovereign debt worldwide.”
• Inflation. Investors holding a fixed return for five years want it to beat the inflation they expect over that time, so higher expected inflation pushes yields up. The guide to how mortgage rates are determined covers inflation’s other routes into rates.
• Central bank bond purchases. Buying government bonds raises their price and lowers their yield, the Bank explains; it bought bonds this way (quantitative easing) to support the recovery from the pandemic.

None of these makes the next move predictable. Where forecasters expect rates to go is on the interest rate forecast page, and how today’s rates compare with past decades is on the mortgage rate history page.

Watching yields when you need a fixed rate

Since fixed rates are benchmarked to it, a sustained move in the 5-year yield is one sign of the direction new fixed rates may take. The Bank of Canada publishes the yield every business day on its selected bond yields page. If you are buying or renewing, a lender’s rate hold can protect a quoted rate from a rise while you shop; its page covers how long holds last and what they cost.

Related pages

• Bank of Canada policy rate explained
• How the US Federal Reserve affects Canadian mortgages
• How mortgage rates are determined
• Fixed vs variable mortgages