October 28, 2026
The Bank of Canada increased its overnight policy rate by 0.25% to 2.50%. This is the first rate change from the Bank of Canada this year and is disappointing news for mortgage borrowers. Variable mortgage rates will now also increase by 0.25% as a result.
Why the Bank of Canada changed course
The market now expects another rate increase before the end of the year. Just a month ago the market was expecting a rate hold at today’s meeting and through to the end of 2026. Those odds changed quickly after a recent speech from the Governor of Bank of Canada where he changed the tone, essentially saying inflation risks were increasing and a hike was back on the table.
Through recent months the Bank of Canada held the view that interest rates cannot control energy prices, tariffs, wars or supply-chain disruptions. This recent change in the Bank of Canada’s view appears to stem from a belief that if it waits until energy-driven inflation spreads through the economy and inflation expectations rise, it may be too late to act. The bank stated:
“With the outlook for inflation substantially higher and the economy showing resilience, an increase in the policy rate is needed to reduce the risk that elevated energy prices could spill over and become generalized inflation.”
The Bank is taking a pre-emptive approach. This may make sense to a macro-economic policy maker but the attempt to curb demand to control future inflation will produce immediate pain for Canadians, especially mortgage borrowers. This rate hike comes at a time when mortgage delinquencies are rising, power of sale and foreclosure activity is spiking, house prices are falling, fixed mortgage rates are already higher, the mortgage renewal wave is continuing and affordability remains stretched.
What this means for mortgage borrowers
The bottom line for mortgage borrowers resulting from this announcement:
- Variable-rate mortgage - rates will increase by 0.25%
- Fixed-rate mortgage - no effect
- Renewals - variable rates and short-term fixed rates remain most popular
- Big Takeaway - the interest rate trend is higher
How mortgage rates are changing
Fixed, insured mortgage rates are now mostly in the high-4% range across most lenders, with some uninsured rates now above 5%. The good news is that insured mortgage borrowers can still find promotional rates below 4.5%, making it worthwhile to shop around. Our best insured, variable mortgage rate was 3.4% until today. That rate will now increase to 3.65%.
The impact of energy price-driven inflation on interest rates has not fully played out. Fixed rates rose over the past two months in response to inflation fears. Now that the Bank of Canada is concerned that the inflation impact could be longer term and become entrenched, variable rates are also on the rise.
Protecting your next mortgage decision
Prospective mortgage borrowers need to be proactive. No one knows where rates may go and the inflation pressures brought on by energy prices are moving rates higher. If you are planning to buy a home or renew/refinance your mortgage in the coming months, current conditions leave you exposed to the risk of higher rates ahead. To protect yourself, secure a rate hold or mortgage pre-approval right away. This lets you lock-in today’s rates, is available to you at no cost and comes with no obligation or commitment - It is a free option for you to shield yourself from sudden rate increases.
What happens next
Looking forward, the Bank of Canada stated today that “there could be a need to increase the policy rate further.” The market is currently pricing in another rate increase at their next meeting on December 9.
The prime rate at the banks will now increase to 4.70%.
Bank of Canada announcement
You can read the Bank of Canada’s press release here.