Bank of Canada rate announcement: a quarter-point hike to 2.5%, and what it means for your mortgage

Short answer: The Bank of Canada rate announcement on October 28, 2026 was a quarter-point hike. The Bank raised its target for the overnight rate by 0.25 percentage points to 2.5%, with the Bank Rate at 2.75% and the deposit rate at 2.45% ^[1]. It's the first change since the rate settled at 2.25% in October 2025 ^[3]. If you have a variable-rate mortgage or HELOC, your cost of borrowing is likely to rise modestly. If you have a fixed rate, nothing changes until renewal. Either way, this is a moment to check your numbers, not to panic.

What the Bank of Canada decided, and why

The Bank said it raised the policy rate "to reduce the risk that continuing high energy prices spread broadly to the prices of other goods and services" ^[1]. The main points from the announcement and the October Monetary Policy Report ^[1][2]:

• Inflation is running above target. CPI inflation has been around 3% since April and is expected to rise to about 3.5% by the end of the year, mostly because of persistently high oil prices.
• Underlying inflation is calmer. Excluding gasoline, inflation was 2.2% in September, and core measures remain close to 2%. The worry is that higher fuel and input costs get passed on to other prices over the next year.
• Growth has picked up. The Bank now expects the economy to grow 1% in 2026 and 2% in 2027 and 2028, a bit stronger than it projected in July.
• The outlook for inflation. CPI inflation is projected to average 3% in 2027, then come down to 2% by the middle of 2028.
• What comes next. The Bank said there "could be a need to increase the policy rate further," but that Governing Council agreed "to proceed carefully." The next decision is December 9, 2026.

What it means for variable-rate mortgages and HELOCs

Variable mortgage rates and HELOCs are usually priced as prime plus or minus a set amount, and lenders' prime rates typically move with the Bank's policy rate, often within a day or two of an announcement. How you feel a hike depends on your mortgage type ^[4][6]:

• Adjustable payments: your payment goes up soon after your lender's prime rate changes.
• Fixed payments on a variable rate: your payment stays the same, but more of it goes to interest and less to principal. It's worth knowing your trigger rate ^[4].
• HELOCs: the interest on your outstanding balance rises with prime.

Example: a $400,000 balance with 25 years remaining, adjustable payments and monthly compounding. Not a quote; your rate, balance and terms will differ.

Want to know what this means for your payment? A licensed 8Twelve agent can review your mortgage and compare options across 65+ lenders, at no cost to you, OAC. Compare current rates

What it means for fixed-rate mortgages

If you're in a fixed-rate term, your rate and payment don't change until your term ends. New fixed rates are priced mainly off bond yields, not the policy rate directly, so they can move before or after an announcement depending on how markets read the outlook. The Bank noted that bond yields in advanced economies are higher than in July ^[1]. If you're shopping for a fixed rate, compare offers rather than assuming today's hike sets the price.

Renewing or refinancing soon?

About to renew? A hike is a good reason to start early, not a reason to rush ^[5]:

1. Get a rate hold. Many lenders will hold a rate for a set period before your renewal. If rates rise further, you're protected; if they fall, you can usually still take the lower rate before funding.
2. Don't just sign the renewal letter. Your current lender's first offer isn't always its best. Comparing offers from several lenders is the simplest way to make sure you're not overpaying.
3. Revisit fixed vs. variable. With the Bank signalling it may need to raise rates again, ask yourself how much payment movement your budget can absorb. That's a budget question, not a forecast.
4. Thinking of refinancing? If you're carrying high-interest debt, a refinance or a HELOC may still make sense even after a hike. Run the numbers on the total cost, including any prepayment penalty.

Our mortgage renewal team can walk you through each step.

Calm next steps

A quarter-point move is modest. What matters more is whether further hikes are coming, and the Bank has said it will proceed carefully. For the bigger picture, read our guides on the Bank of Canada rate hike in 2026 and whether mortgage rates will go up in 2027. Our October decision preview also covers how each outcome affects variable and fixed borrowers.

See what you'd pay: try our mortgage payment calculator with a few different rates.

This article is for general information only and isn't financial, legal or tax advice. Rates, products and terms change without notice and are available on approved credit (OAC). The rate and terms you qualify for depend on your individual financial situation, including credit, income, property and loan-to-value. Example rates and payments are for illustration only, as of October 28, 2026, and are not an offer. 8Twelve Mortgage arranges mortgages through 65+ lenders and does not lend directly. Licensed across Canada — see our licences.

The policy rate decision, economic projections and quotes are from the Bank of Canada's October 28, 2026 announcement and Monetary Policy Report. Payment examples assume a $400,000 balance, 25 years remaining, a 3.95% starting variable rate and monthly compounding.