Canada Inflation Reaches 3.1% – What It Means for Mortgage Rates in 2026

If you've filled up your gas tank recently and wondered why everything seems to be getting more expensive again, you're definitely not alone.

Canada's latest inflation report has arrived, and the numbers are creating some interesting conversations about where mortgage rates could be heading next.

According to Statistics Canada, the annual inflation rate increased to *3.1% in September 2026*, compared to 3.0% in August.

At first glance, that might sound like bad news for anyone hoping for lower mortgage rates. But when we look a little deeper into the report, the picture becomes more interesting.

Let's break it down in simple terms.

## Why Did Inflation Increase?

The biggest reason behind September's inflation increase was gasoline.

Gas prices jumped a significant *27.8% compared to September last year*, largely due to global oil prices and ongoing geopolitical tensions.

However, here's something important that often gets overlooked.

*When gasoline is removed from the calculation, Canada's inflation rate actually slowed from 2.4% in August to 2.2% in September.*

In other words, while the overall inflation number increased, price pressures across many other parts of the economy were beginning to ease.

And that's something the Bank of Canada will be paying close attention to.

## Some Good News at the Grocery Store

We all know groceries aren't cheap anymore.

Whether you're buying milk, vegetables, or meat for your family, the difference compared to a few years ago is noticeable.

But there is some encouraging news.

Grocery inflation slowed to *1.7% in September*, down from 2.8% in August.

Prices for certain items, including fresh vegetables, actually declined compared to last year.

Does this mean groceries are suddenly affordable again? Unfortunately, no.

Grocery prices are still approximately *33% higher than they were in September 2020*.

What it does mean is that the pace at which grocery prices are increasing has slowed.

And that's an important distinction.

## What About Housing Costs?

For homeowners and homebuyers, the housing portion of the inflation report is particularly interesting.

Shelter costs increased 1.8% compared to last year, while rent prices rose 2.8%.

Even more interesting, the mortgage interest cost index declined by 0.2% year over year.

That doesn't mean every homeowner is paying less interest. Your actual mortgage payments depend on your mortgage balance, interest rate, renewal date, and mortgage structure.

But it does suggest that mortgage interest costs, as measured in the inflation report, are no longer increasing the way they were during previous periods of higher interest rates.

For Canadians carrying significant mortgage debt, that's an important development.

## So, Will Mortgage Rates Come Down?

This is probably the question we hear most often at Brar Mortgages.

And the answer isn't as simple as looking at one inflation number.

The Bank of Canada has an inflation target of 2%, and it looks beyond headline inflation to understand what's happening throughout the economy.

In September, two of its preferred measures of underlying inflation, CPI-trim and CPI-median, eased to 1.8% and 1.9%, respectively.

That's encouraging because it suggests inflationary pressures aren't spreading as aggressively across the economy as the headline figure might suggest.

However, higher energy prices, international uncertainty, trade tensions, and future inflation expectations remain important risks.

The Bank of Canada's next interest rate announcement is scheduled for *October 28, 2026*.

Whether the Bank decides to increase rates or leave them unchanged, one thing is clear: mortgage rates will continue to depend on more than just a single inflation report.

It's also important to remember that variable mortgage rates are influenced by lender prime rates, while fixed mortgage rates are more closely connected to bond market conditions.

This means fixed and variable rates don't always move in the same direction.

## What Does This Mean for Homebuyers in Edmonton and Alberta?

If you're planning to buy your first home, upgrade to a larger property, refinance, or renew your existing mortgage, this is where having a mortgage strategy becomes important.

Trying to predict the perfect time to enter the housing market can be difficult.

Instead, consider a few practical questions:

- Can you comfortably afford the monthly mortgage payment at today's available rates?
- Would a fixed or variable mortgage make more sense for your situation?
- How would your finances look if interest rates increased?
- If you're renewing soon, have you compared your existing lender's offer with other available options?
- Could refinancing help you reorganize your debt or improve your monthly cash flow?

Every homeowner's situation is different.

For example, someone purchasing their first property may benefit from payment stability, while someone expecting to sell their home in the next couple of years may need more flexibility.

The lowest advertised interest rate isn't always the best mortgage.

*The right mortgage is one that works with your financial situation, your future plans, and your comfort level.*

## Our Take at Brar Mortgages

September's inflation report sends a mixed but important message.

Yes, inflation increased to 3.1%.

But much of that increase came from higher energy prices, while several underlying inflation measures continued to cool.

For Canadians, the cost of living remains a challenge. For the mortgage market, however, this report reinforces the importance of watching broader economic trends rather than reacting to a single headline.

At Brar Mortgages, we believe making a mortgage decision shouldn't depend on guessing exactly what the Bank of Canada will do next.

It should start with understanding your numbers, comparing your options, and building a plan that makes sense for you.

*Buying a home, renewing your mortgage, or thinking about refinancing?*

We're here to help you understand your options and make informed decisions with confidence.

Manjinder Brar | Mortgage Broker
Brar Mortgages
Website: www.brarmortgages.com

Your Home. Your Mortgage. Our Priority.

Sources: Statistics Canada, Consumer Price Index — September 2026 (released October 19, 2026); Bank of Canada, Consumer Price Index data and monetary policy announcements.

Disclaimer: This article is intended for general information only and does not constitute financial advice or a mortgage approval. Mortgage rates, products, and qualification requirements are subject to lender criteria and may change.