On Monday, October 19, Statistics Canada released its monthly inflation report. The headline number went up: prices were 3.1 per cent higher in September than a year earlier, up from 3.0 per cent in August. That sounds like bad news for anyone hoping for lower mortgage rates. But look underneath it and the picture is more mixed, and much of what's pushing the number up is one thing: gasoline. Here's what the report says in plain English, why the Bank of Canada is watching it so closely, and what it means for buying, selling and owning a home in the GTA.
First, what is "CPI"?
The Consumer Price Index is Statistics Canada's way of tracking the cost of everyday life. Every month it prices the same big "basket" of things Canadians buy: groceries, gas, rent, mortgage interest, insurance, clothing, phone plans, travel and much more. When people say "inflation is 3.1 per cent", they mean that basket costs 3.1 per cent more than it did a year ago.
The Bank of Canada's job is to keep that number close to 2 per cent. Its main tool is its interest rate, which flows through to variable-rate mortgages, lines of credit and, over time, the rates banks charge on new mortgages. That's why an inflation report can move the housing market.
Two and a half years of inflation, in one picture
Inflation spent most of 2025 inside the Bank of Canada's comfort range. Then, from March 2026, energy prices pushed the headline number up. Meanwhile, the steadier "core" measure kept falling and is now just under the 2 per cent target. The two lines have crossed:
What happened in September
Most of the increase came from energy. Oil prices climbed to their highest level since May because of the ongoing conflict in the Middle East, including disruption to shipping through the Strait of Hormuz. At the pump, that showed up fast:
Take gasoline out and inflation was 2.2 per cent, lower than in August. Grocery price growth slowed sharply, with fresh vegetables actually cheaper than a year ago. Prices at the store are still high, though: they're up 33 per cent since September 2020.
Headline vs "core" inflation, and why the difference matters
Because a few volatile items like gas can swing the headline number, the Bank of Canada also watches "core" inflation. Its two favourite measures, called CPI-trim and CPI-median, set aside the biggest price jumps and drops each month to show the steady, underlying trend.
Those measures went the other way in September. CPI-median eased to 1.9 per cent from 2.0 per cent, and CPI-trim to 1.8 per cent from 1.9 per cent, both slightly below the 2 per cent target. Fewer items in the basket are rising quickly, too: 29.2 per cent of them were up 3 per cent or more, down from 34.2 per cent in August.
In plain terms: gas is making life more expensive right now, but the rest of the economy isn't showing a broad new wave of price increases. The headline also came in a little lower than economists expected (3.2 per cent).
The housing costs inside the report
Shelter is the biggest single piece of the basket, so it's worth a closer look:
- Rent rose 2.8 per cent from a year ago, the same pace as August. Rents are still climbing, just more slowly than in recent years.
- Mortgage interest cost fell 0.2 per cent. This measures the interest Canadians pay on their mortgages. After years of rate increases pushed it sharply higher, it's now slightly below a year ago.
- Home and mortgage insurance rose 4.9 per cent, one of the faster-rising housing costs, along with maintenance and repairs (+1.2 per cent).
- Homeowners' replacement cost fell 1.9 per cent. This measure follows the price of new homes, not counting the land. It's easing, not adding to inflation.
What the Bank of Canada does next
The Bank's key interest rate has been 2.25 per cent since October 2025. Its next decision is Wednesday, October 28 at 9:45 a.m., along with a full update of its forecasts.
The Bank has so far chosen to look past the jump in energy prices, because raising rates doesn't make oil cheaper. But its tone has firmed. Speaking on October 17, Governor Tiff Macklem said the Bank's inflation outlook would be "quite a bit higher" than it expected in July, and described the question in front of it this way:
"The question we're going to be asking ourselves is, is inflation likely to come back down towards our target on its own."— Tiff Macklem, Governor of the Bank of Canada, October 17, 2026
Opinions are split. Financial markets have been pricing in a real chance of a rate increase this fall, though estimates of the odds swung widely in the days around the report. Many bank economists expect the Bank to hold. TD Economics said the September data supports the view that the Bank "can remain on hold this year", and RBC's base case is no change for the rest of 2026. The softer core numbers and a weak job market, with employment down in August and September, are the main arguments for waiting.
What it means for mortgage rates
Here's the part many people miss: fixed mortgage rates have already gone up, without the Bank of Canada doing anything. Fixed rates follow the bond market, not the Bank's rate. The five-year Government of Canada bond yield, which lenders use to price five-year fixed mortgages, was about 2.6 per cent before the conflict in the Middle East began in late February. By early October it was above 3.6 per cent.
Lenders have followed. Canada's big banks raised fixed mortgage rates by up to half a percentage point over about five weeks from early September. On a $400,000 mortgage with 22 years left, going from 4.64 per cent to 5.14 per cent adds roughly $110 a month, or about $6,600 over a five-year term.
Variable rates are different: they move with the Bank of Canada's rate. If the Bank holds on October 28, variable payments stay where they are. If it raises by a quarter point, a $500,000 variable mortgage on a 25-year amortization would cost roughly $70 more a month.
What it means for GTA real estate right now
The uncertainty is already visible in the market. In TRREB's September report, buyers were described as being in "a holding pattern":
Two things stand out. First, fewer people are buying, and higher fixed rates plus uncertainty about inflation are a big reason why. Second, even fewer people are selling: new listings fell faster than sales for the third month in a row. That's why prices are drifting lower rather than dropping sharply. Homes are still selling for about 98 per cent of asking on average. (Our September GTA market update has the full numbers by region and home type.)
Where it could go from here
Nobody knows how long the energy shock will last, and anyone who tells you exactly where rates will be next spring is guessing. But it helps to think in two broad scenarios:
- The energy shock fades. If oil prices settle, headline inflation should drift back toward 2 per cent, since core inflation is already there. The Bank of Canada could stay on hold, bond yields could ease, and fixed rates could come back down. With so many buyers waiting on the sidelines and listings thin, demand could return quickly, and prices could firm up.
- Inflation spreads. If higher fuel and shipping costs start pushing up prices across the economy, the Bank could raise rates, possibly more than once. Borrowing would get more expensive, and the market would likely stay slow for longer. Even then, the low number of homes coming up for sale should help limit how far prices fall.
One thing doesn't change in either scenario: rent is still rising, at 2.8 per cent a year, and the GTA's population keeps growing. Over the long run, the region still needs more homes than it's building.
Practical steps for this fall
- Buying? Get a pre-approval with a rate hold. Many lenders will hold a rate for up to 120 days, which protects you if fixed rates keep rising while you look. Budget as if your rate were half a percentage point higher than today.
- Renewing in the next six months? Start talking to your lender, or a mortgage broker, about four months before your renewal date so you can lock a rate early. Compare offers instead of signing the first renewal letter.
- On a variable rate? Know what a quarter-point or half-point increase would do to your payment, and decide now whether you'd switch to fixed if rates rise.
- Selling? Price to this month's comparable sales, not last spring's. Buyers are cautious, but you also have less competition than a year ago.
- Watching the market? The dates to mark: the Bank of Canada's decision on October 28, TRREB's October market report in early November, and October's inflation report on November 16.
If you'd like to talk through what this means for your own plans, whether that's buying, selling or a renewal coming up, get in touch with The Renavu Team. We're happy to run the numbers with you.
Sources: Statistics Canada, "Consumer Price Index, September 2026" (The Daily, October 19, 2026); TD Economics and RBC Economics commentary on the September 2026 CPI; Bank of Canada Governor Tiff Macklem's remarks to reporters, October 17, 2026 (as reported by The Canadian Press); Canadian Mortgage Trends (October 2026) on Government of Canada bond yields; Money.ca (October 11 and 20, 2026) on bank mortgage rate changes and the payment examples; TRREB September 2026 Market Watch. Payment examples are illustrations, not quotes. This article is general information, not financial, mortgage or investment advice. Please speak with a licensed professional about your situation.
