The Bank of Canada raises its key interest rate to 2.50%: what this means for your mortgage

The Bank of Canada surprised several homeowners on October 28: its policy rate went from 2.25% to 2.50%. This is the first increase since July 2023. If you have a mortgage, an upcoming renewal or plans to buy, here’s what you need to know.

Why did the Bank act?

According to analyses published after the announcement, inflation is being driven in large part by rising oil prices linked to the war in Iran. The Bank expects inflation to be around 3.5% by the end of the year. It also believes the economy is doing better than previously thought and hinted that further increases are possible. The next decision is scheduled for December.

Variable rates: the effect is immediate

Your rate follows the prime rate, which has increased by 0.25 percentage points. According to Ratehub, the lowest variable rate in the country went from 3.45% to 3.70%.

For example: on a property worth about $666,000, with a 10% down payment and a 25-year amortization period, the monthly payment would go from about $3,072 to $3,154—an increase of $82 per month. Your situation will be different, but this gives you an idea of the scale. Depending on your mortgage terms, your payment may also stay the same while the interest portion increases: check how your product works.

Fixed rates: not directly affected

Fixed rates are driven mainly by Government of Canada bond yields. The lowest fixed rate is currently around 4.34%. A sharp drop in the short term seems unlikely, but no one can guarantee it.

What to consider now

If your renewal is coming up (in 4 to 6 months), discuss your options without delay: many lenders let you lock in a rate in advance. If you have a variable rate, consider whether you could handle a few more increases; if not, it’s worth looking into switching to a fixed rate. If you’re buying or refinancing, have your borrowing capacity calculated using the current rate. Finally, compare lenders: the difference could add up to thousands of dollars over a term.

In summary

A 0.25-point increase isn’t a disaster, but it can make a difference if your renewal is coming up or your budget is tight. The best time to act is before the next decision in December.

Have questions about your mortgage? Contact me for a free, no-obligation analysis of your situation.

Chantal Chevalier, mortgage broker

Sources: Ratehub (October 28, 2026 decision), RBC, Bank of Canada. General information only; this does not constitute personalized financial advice.