Bank of Canada raises its rate to 2.50%: what the October 28 hike means for your mortgage
The Bank of Canada hiked to 2.50% on Oct 28, 2026, its first increase since 2023. Prime is now 4.70%. Here's what it costs variable and fixed borrowers.
The Bank of Canada raised its policy rate by 0.25 points to 2.50% on Wednesday, October 28, 2026. It's the Bank's first increase since July 2023. The big banks raised prime to 4.70% the same afternoon, so variable-rate and HELOC payments go up from October 29. Fixed-rate borrowers see no change until they renew.
What did the Bank of Canada announce on October 28?
The overnight rate target was 2.25%. It is now 2.50%, effective October 29. The Bank Rate is now 2.75% and the deposit rate is 2.45%.
The big banks followed within hours. Prime, which was 4.45%, rose to 4.70% effective Thursday, October 29.
The next rate decision is December 9, 2026. The Bank publishes its next full forecast on January 27, 2027.
Why did the Bank raise rates?
Energy prices are the reason. The Bank's press release says oil prices and refinery margins have kept CPI inflation around 3% since April. The Bank expects about 3½% by the end of the year.
Excluding gasoline, inflation was 2.2% in September, and the core measures are close to 2%. The Bank raised rates "to reduce the risk that continuing high energy prices spread broadly to the prices of other goods and services."
It didn't promise more hikes. The statement says "there could be a need to increase the policy rate further, but given uncertainties, Governing Council agreed to proceed carefully." In his opening statement, Governor Tiff Macklem said the Bank will decide one meeting at a time.
What does the Bank expect for inflation and growth?
These are the main numbers from the October Monetary Policy Report.
| Item | October 2026 MPR |
|---|---|
| CPI inflation, end of 2026 | About 3½% |
| CPI inflation, 2027 average | 3% |
| Inflation back to about 2% | By mid-2028 |
| GDP growth, 2026 | 1% |
| GDP growth, 2027 and 2028 | 2% |
| Q2 2026 GDP growth | 3.3% |
| Q3 2026 GDP growth (tracking) | About 2% |
| Unemployment rate | Around 6½% |
Housing gets one line. The Bank expects it "to remain relatively weak."
How much more will a variable-rate mortgage cost?
About $13 a month for every $100,000 you owe, if your payment adjusts with prime.
Most variable mortgages are priced at prime minus a discount. The discount stays the same when prime moves. A borrower at prime minus 0.96 paid 3.49% until October 28 and pays 3.74% from October 29.
Take a $500,000 mortgage with 25 years left. We used semi-annual compounding, the same method as our payment calculator.
| Rate | Prime | Monthly payment |
|---|---|---|
| 3.49% | 4.45% (to October 28) | $2,494 |
| 3.74% | 4.70% (from October 29) | $2,560 |
That's about $66 a month more.
Some variable mortgages keep the payment the same and change how much goes to interest. On the same $500,000, first-month interest goes from about $1,444 to $1,546. So about $103 less goes to principal each month. Our guide to trigger rates explains when that starts to matter.
To see your own number, enter your balance and new rate below. It starts at $500,000 and 3.74%.
HELOCs are usually priced at prime plus a margin, so a HELOC rate rose by the same 0.25 points.
Will fixed mortgage rates go up too?
Fixed rates had mostly moved before the announcement. They follow Government of Canada bond yields, not the overnight rate.
According to Bank of Canada bond data, the 5-year yield was 3.35% on September 1. It was 3.57% on October 27 and closed at 3.62% on decision day.
| GoC yield | Oct 27 | Oct 28 |
|---|---|---|
| 2-year | 3.36% | 3.41% |
| 5-year | 3.57% | 3.62% |
| 10-year | 3.83% | 3.87% |
The 5-year yield rose about a quarter point between early September and the decision, and fixed rates rose with it. On October 29, the best tracked 5-year fixed on the Ratellow rate card was 4.59%.
The MPR also notes that long-term government bond yields have climbed to their highest levels in more than a decade.
Where was the housing market before the hike?
It was slowing. CREA's September data, released October 16, showed sales down 2.3% from August. The MLS Home Price Index was down 3.4% from a year earlier.
The national average price was $666,538, with 4.9 months of inventory. CREA publishes October numbers on November 17.
What should you do this week?
If your variable payment adjusts with prime, your lender will send you the new amount. Check it against the calculator above.
If your variable payment stays the same, look up your trigger rate and see how close you are. Each hike moves you closer.
If you carry a HELOC and pay only the interest, your minimum payment went up on October 29.
If your fixed term ends in the next few months, ask your lender and at least one other lender for a rate hold. The 180-day renewal window guide explains when to start.
If you're buying, the stress test is based on your contract rate. A variable rate that's 0.25 points higher means a qualifying rate that's 0.25 points higher. The stress test guide has the details.
For what moved in the days after the decision, read our October 31 follow-up.
Primary sources
Primary sources cited by the Ratellow Research Team. Editorial standards · Correction policy
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