On Wednesday, October 28, the Bank of Canada raised its policy rate by 0.25 percentage points, from 2.25% to 2.50%—its first increase since July 2023. Big banks raised prime from 4.45% to 4.70%, effective October 29. If you have an adjustable-rate variable mortgage, your payment is set to rise; if you have a fixed rate, your payment stays the same until renewal.
Why the Bank raised rates
The Bank called the increase a precaution. It is trying to keep higher energy costs from spreading through the wider economy and making inflation harder to bring back to target.
- Energy costs are staying high. Oil prices and refinery margins are raising the cost of fuel, production and shipping.
- More of those costs may reach shoppers. Businesses have absorbed much of the increase so far, but Bank of Canada surveys suggest more may be passed on over the next year.
- Inflation is expected to remain above target for a while. The Bank projects headline inflation at about 3.5% by the end of 2026, averaging about 3% in 2027, then returning to 2% around mid-2028. Most core inflation measures remain close to 2% today.
- The economy has shown resilience. Growth has beaten expectations, although there is still slack and new U.S. tariffs are expected to weigh on activity.
The Bank described the hike as insurance against energy-driven inflation becoming entrenched, not a signal that the economy is in crisis.
What it means for your mortgage
The immediate change depends on whether your mortgage rate moves with prime and how your lender structures your payments. The examples below show an illustrative adjustable-rate variable mortgage at prime minus 0.80%: 3.65% before the change and 3.90% after it.
| Mortgage balance | Before (3.65%) | After (3.90%) | Change per month |
|---|---|---|---|
| $300,000 | ~$1,522 | ~$1,562 | +$40 |
| $500,000 | ~$2,536 | ~$2,603 | +$67 |
| $750,000 | ~$3,804 | ~$3,905 | +$100 |
Illustrative payments assume a 25-year amortization and Canadian semi-annual compounding. Your lender’s rate, balance and payment schedule may differ. As a rule of thumb, this quarter-point increase adds about $13 a month per $100,000 on an adjustable-rate variable mortgage.
Adjustable-rate variable: Your payment typically changes at the next payment date after your lender adjusts prime. Check your lender’s notice to see when the new amount takes effect.
Fixed-payment variable: Your payment may stay the same, while a larger share goes to interest. Keep an eye on your trigger rate, and see how variable mortgages and trigger rates work.
Fixed rate: Nothing changes in your current payment. Fixed rates follow bond yields rather than the Bank of Canada’s policy rate, and they have been climbing since February. The effect for you comes at renewal. For context on choosing amid uncertainty, read our fixed-rate guide.
Renewing in the next 6–12 months: Start comparing before you accept an offer. A lender’s renewal offer is a starting point; renewal offers can trail rates available to new clients. A broker can compare options and ask about holding a rate while you decide.
Buying with a pre-approval: If your pre-approval is based on a variable rate, check whether the updated rate changes your budget before you make an offer. The hike may also affect what you can qualify for; see what a variable approval can mean.
HELOC or line of credit: These are often tied to prime, so the rate on your balance may rise by the same 0.25%. Check your account terms for how and when the change applies.
What could happen next
The Bank says it will decide “one meeting at a time.” Further increases are possible, but not assured. It is watching energy prices, how much of the cost increase businesses pass on, and developments in Canada–U.S. trade.
If energy prices fall or demand weakens, the Bank could hold rates instead. Its next scheduled decision is December 9, 2026. That date is a checkpoint, not a promise of a particular move.
Whether this hike matters now depends on your mortgage type and timing. A Homewise broker can compare lenders, model payments at higher rates and help you assess renewal options. Talk with an advisor or start an application if you want to review what the change means for your plans.
