Bank of Canada Raises Rate to 2.5% — October 28, 2026
Team Gill • October 28, 2026
On October 28, 2026, the Bank of Canada raised its key interest rate by 0.25%, bringing it to 2.5%. If you have a mortgage, are shopping for a home, or have a renewal coming up, this decision matters. Here is a plain-language look at what changed, why it happened, and what it could mean for you.
Why the Bank of Canada Raised Rates
The short answer is inflation. Three factors pushed the Bank to act:
- High energy prices. Ongoing conflict in the Middle East has kept oil prices elevated for months. Inflation has been running around 3% since April and is expected to reach about 3.5% by the end of the year.
- Rising business costs. Higher fuel prices make it more expensive to produce and ship goods. Imported industrial and electronics prices have also increased. The Bank is concerned these costs will eventually be passed on to consumers.
- A stronger economy than expected. Canada's economy grew 3.3% in the second quarter — faster than forecast. Consumer spending has been solid and business investment has picked up. A stronger economy can fuel more inflation, which the Bank wants to get ahead of.
What This Means for You
Here is how the rate increase could affect you depending on your situation:
- Variable-rate mortgage: Your rate will go up by approximately 0.25%. Depending on your mortgage structure, your payment may increase or more of your payment will go toward interest rather than principal.
- Home equity line of credit (HELOC): The interest on your outstanding balance will increase. If you carry a balance, expect slightly higher monthly costs.
- Fixed-rate mortgage: No immediate change. Your rate is locked in until your term ends. However, fixed rates in the market may stay elevated, which matters when you renew.
- Renewal coming up: Now is the time to start planning. You can typically lock in a rate up to 120 days before your renewal date. Talk to a mortgage professional to explore your options early.
- Planning to buy: Higher rates affect how much you qualify for. Getting pre-approved sooner rather than later gives you a clear picture of your budget before rates potentially move again.
What to Expect Next
The Bank of Canada was clear that further increases are possible, but said it will proceed carefully given the uncertainty in the economy — particularly around trade and energy prices. Here is the outlook they shared:
- Inflation is expected to average around 3% through 2027 before coming back to 2% by mid-2028.
- The Canadian economy is expected to grow about 1% in 2026 and 2% in 2027 and 2028.
- The next rate announcement is December 9, 2026 .
There is still considerable uncertainty, especially around Canada-US trade relations and how long energy prices stay high.
Frequently Asked Questions
What is the Bank of Canada rate now?
As of October 28, 2026, the overnight rate is 2.5%.
Will my mortgage payment go up?
If you have a variable-rate mortgage or HELOC, yes — you will likely see a small increase. If you have a fixed-rate mortgage, your payment stays the same until your term ends.
Should I switch from variable to fixed?
It depends on your current rate, the penalty for breaking your mortgage, and where fixed rates are today. This is worth discussing with your mortgage broker before making a move.
Will rates keep going up?
Possibly. The Bank has not committed to more increases, but has not ruled them out. The next decision is December 9, 2026.
When is the next Bank of Canada announcement?
December 9, 2026.
Have questions about how this affects your mortgage? Reach out to book a no-obligation mortgage review — we are happy to walk you through your options.
This post is for general information purposes only and does not constitute financial or mortgage advice. Always speak with a licensed mortgage professional about your specific situation.
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Mick & Sheila Gill
CANADIAN MORTGAGE EXPERTS
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