Bank of Canada Hikes to 2.50%: What It Means for Your Mortgage

The Bank of Canada raised its overnight rate by 25 basis points to 2.50% on Wednesday, October 28, ending seven straight holds at 2.25% and delivering its first increase since July 2023. The Bank Rate is now 2.75% and the deposit rate 2.45%.

Why did it hike?

The Bank's October Monetary Policy Report says inflation has been higher than expected and is projected to stay around 3% through much of 2027. Governor Tiff Macklem said further increases may be needed to stop rising energy costs from turning into broader, lasting inflation. The report also expects housing activity to stay relatively weak.

What happens to variable-rate mortgages and HELOCs?

Banks usually move their prime rate within days. A matching quarter-point move would lift prime from 4.45% to 4.70%. On a $50,000 HELOC at prime plus 0.50%, interest-only payments would rise from about $206 to $217 a month.

What about fixed-rate mortgages?

Fixed mortgages are priced off Government of Canada bond yields, not the overnight rate, so your existing fixed payment does not change until renewal. Yields have already reflected expectations of a hike.

 

How does it fit with the housing market?

Canada's housing market is already soft: Toronto sales fell 9% year on year in September, Vancouver-area sales fell 8.4% and Calgary's fell 3.8%. Housing starts are down 4% so far this year.

What next?

The next decision is on December 9, 2026, and the next Monetary Policy Report comes on January 27, 2027.