The Bank of Canada just raised rates. What happens to my mortgage?

Published October 29, 2026 · Last updated October 29, 2026

Quick answer: The Bank of Canada raised its policy rate by 0.25 points to 2.50% on October 28, 2026, its first increase in three years. If you have a variable-rate mortgage or a HELOC, your rate goes up once your lender raises its prime rate. Prime is now 4.70%, up from 4.45%. If you have a fixed rate, nothing changes until your term ends.

On a $500,000 variable mortgage with a 25-year amortization, a full 0.25-point increase adds about $68 a month if your payment adjusts. If your payment is fixed, the payment stays the same and more of it goes to interest instead.

Why did the Bank of Canada raise rates?

To stop high energy prices from spreading into everything else. Energy prices have been high for the eight months of the Middle East conflict, oil is a little over $100 a barrel, and businesses told the Bank they plan to pass more of those costs on over the next year. At his press conference, Governor Tiff Macklem said Canadians are already paying more at the pump and the Bank doesn’t want them “to pay for this twice.”

The Bank now expects CPI inflation to rise to about 3.5% by the end of 2026, average 3% in 2027 and return to 2% in the middle of 2028 (Bank of Canada, October 28, 2026).

Will rates go up again?

Possibly. The Bank said there “could be a need to raise the policy rate further,” but that it will “proceed carefully” given the uncertainty around the war and Canada–US trade. Macklem repeated that there is no predetermined path and the Bank will decide one meeting at a time. The next decision is December 9, 2026.

Macklem also said 2.50% is still at the low end of the Bank’s estimate of the neutral rate, which runs from 2.25% to 3.25%. In plain terms, the Bank doesn’t think rates are high enough yet to slow the economy down.

What happens to a variable-rate mortgage?

Your interest rate rises by the same amount as your lender’s prime rate. What happens next depends on which kind of variable you have.

• Adjustable payment. Your payment is recalculated so it still pays the mortgage off on schedule. First National’s adjustable-rate mortgage works this way.
• Static payment. Your payment stays the same. More of it goes to interest and less to principal, so the mortgage takes longer to pay off. TD, ATB and Servus variables work this way.

Your mortgage statement or commitment tells you which one you have. If it isn’t clear, call your lender or your broker and ask.

Payments use semi-annual compounding, the standard for quoted Canadian mortgage rates; your lender’s figures can differ slightly. The static-payment line assumes the rate stays at 4.10% for the rest of the amortization.

On a static payment, the risk to watch is the trigger rate: the rate where your payment no longer covers the interest. In this example you are a long way from it, since the $2,589.60 payment still covers $1,693.92 of interest with room to spare. If you took your variable when rates were lower and your payment was set lower, check how close you are.

What happens to a fixed-rate mortgage?

Nothing, until your term ends. Your rate and payment are locked for the term you signed.

New fixed rates don’t follow the Bank of Canada directly. They follow Government of Canada bond yields, which move with what investors expect from inflation and future rate decisions. The 5-year bond yield was 3.50% on October 22, 2026, and the best quoted uninsured 5-year fixed rate was 4.74% as of October 21. If you renew in the next few months, those are the numbers to watch, not today’s announcement. We explained that link in why fixed rates rise while the Bank of Canada is on hold.

What happens to a HELOC?

A home equity line of credit charges prime plus a margin, usually interest-only. Every 0.25-point increase adds about $20.83 a month for each $100,000 you owe. A $60,000 balance costs about $12.50 a month more.

Should you lock your variable into a fixed rate now?

Only if a further increase would strain your budget. Locking protects you from future increases. It does not get you a lower rate than you have today. Before this hike, the best uninsured 5-year fixed (4.74%) was still about 0.89 points above the best uninsured 5-year variable (3.85%). With prime up 0.25 points, that variable becomes about 4.10%, so locking still means paying more now in exchange for certainty.

That trade can be worth it. If another $70 a month would force you onto a credit card, certainty has real value. If you can absorb it, you don’t have to decide before the next announcement on December 9. We worked through the full comparison in should I take a variable rate when it’s cheaper than a fixed rate?

When doesn’t this apply?

If your lender sets its own prime rate, or prices your variable off a different base, the increase and its timing can differ. Some lenders change your rate on the first of the next month rather than the day prime moves. Private mortgages are usually fixed for a one- or two-year term and aren’t affected until renewal.

The Bank’s own housing outlook is relatively weak, with sharper adjustments in BC and Ontario than elsewhere. Macklem said higher borrowing rates add to that only “a bit on the margin.” This hike alone isn’t a reason to change a purchase plan.

Frequently asked questions

This is commentary, not advice. Bank of Canada figures as of October 28, 2026. Prime of 4.70% as of October 29, 2026. Best quoted rates as of October 21, 2026, and the 5-year bond yield as of October 22, 2026; quoted rates are not guaranteed offers. Payment calculations prepared October 28, 2026.