Fixed-Variable Mortgage Rate Gap Widens to Nearly 1 Point as Bond Yields Climb

Fixed rates climb while variable holds steady

The gap between fixed and variable mortgage rates has widened to nearly a full percentage point, the largest spread seen in years, as bond market volatility pushes fixed borrowing costs higher while the Bank of Canada's rate hold keeps variable pricing anchored. As of late July 2026, the five-year fixed insured mortgage rate stood at 3.94%, compared with 3.25% for the five-year variable insured rate.

The divergence traces back to the bond market. In early July, the five-year Government of Canada bond yield spiked to about 3.18%, a seven-week high, as renewed US-Iran tensions drove oil prices and U.S. Treasury yields higher. Fixed mortgage rates track government bond yields closely, so the jump fed directly into pricier fixed-rate offers.

Variable rates anchored by BoC hold

Variable rates have been more insulated. The Bank of Canada has held its overnight rate at 2.25% since July 15, and most lenders' prime rate has stayed steady at 4.45% as a result, keeping variable mortgage pricing stable even as fixed rates moved higher on bond market pressure.

This is general market information, not individualized financial advice.

More in Rates

• Bank of Canada Minutes Detail Council's Weighing of Global Growth Risks Against Expected Rebound
• Bank of Canada Deliberations Show a Council Content to Wait and Watch
• Inside the Bank of Canada's July Hold: Officials Say the Inflation-Growth Trade-Off Is Easing
• Bank of Canada Holds at 2.25% Again: What It Actually Means for Your Mortgage