The short answer
On October 28, 2026, the Bank of Canada raised its policy rate by 0.25 percentage points, to 2.50%, because inflation has been higher than it expected. Banks raised prime to 4.70% the next day. Variable mortgages and lines of credit feel it right away. Fixed mortgages don't change until renewal. Buyers have a little less room in their budgets, which matters for sellers' pricing and for investors' cash flow.
What happened on October 28?
The Bank of Canada raised its policy rate by a quarter of a percentage point, from 2.25% to 2.50%. Its reason was inflation: the Bank says inflation has been higher than anticipated and is projected to stay around 3% through much of 2027 before returning close to its 2% target by the middle of 2028. The next scheduled decision is December 9, 2026.
How do mortgage rates actually work?
There are two different engines behind the rates you see.
| Type | What it follows | What happened this fall |
|---|---|---|
| Variable rate | Your lender's prime rate, which moves with the Bank of Canada | Prime rose from 4.45% to 4.70%, effective October 29, 2026 |
| Fixed rate | Bond yields, mainly the 5-year Government of Canada bond | Bond yields rose through 2026, and the big banks raised fixed rates in September and October |
That's why fixed rates were already creeping up before this announcement. They answer to the bond market, not directly to the Bank of Canada.
I already have a mortgage. What changes for me?
Fixed rate: nothing changes until your renewal. Your rate and payment stay the same for the rest of your term. If you renew in the next 12 months, plan for a higher rate than the one you have now, and start the conversation with your lender or mortgage broker a few months ahead.
Variable rate: one of two things happens. With an adjustable payment, your payment goes up. With a fixed payment, your payment stays the same, but more of it goes to interest and less to paying down your mortgage. Check your lender's notice so you know which one you have.
I'm planning to get a mortgage. What should I do?
Get pre-approved before you start seriously shopping, and ask your lender about a rate hold, which can protect you from further increases for a set period while you look. Remember that you qualify at a rate higher than the one you'll actually pay (the stress test), so higher rates also shrink how much you can borrow.
To put a quarter point in perspective: on a $400,000 mortgage with a 25-year amortization, going from 4.50% to 4.75% raises the monthly payment from about $2,214 to about $2,270, roughly $56 a month. That's an example to show scale, not a rate quote. It's real money, but it isn't a reason to panic.
What does it mean if I'm selling?
Buyers' budgets just got a little tighter. Most buyers are working from a pre-approval and a monthly payment they're comfortable with, so a higher rate means they're running their numbers more carefully. That makes pricing right from day one more important. A home priced for today's buyer gets attention in the first weeks, which is when you have the most of it.
If you're selling and buying your next home, line up your pre-approval early so your purchase isn't caught out by a rate change between the two.
What does it mean for investors?
Run your cash flow at today's rate, not last year's, and leave yourself room in case rates go higher at renewal. A rental that only works at the old rate doesn't work.
Questions people ask
Does the Bank of Canada rate hike change my fixed mortgage payment?
No. A fixed rate and payment stay the same until the end of your term. The change shows up at renewal, so if you renew in the next year, plan for a higher rate than the one you have now.
What happens to a variable-rate mortgage when rates go up?
It depends on the type. With an adjustable payment, the payment goes up with prime. With a fixed-payment variable, the payment usually stays the same, but more of it goes to interest and less to paying down the mortgage. Your lender's notice will tell you which one you have.
Why were fixed mortgage rates rising before the Bank of Canada hike?
Fixed rates follow the bond market rather than the Bank of Canada's rate. Five-year Government of Canada bond yields rose through 2026, and lenders raised fixed rates in September and October as a result.
When is the next Bank of Canada rate decision?
The next scheduled decision is Wednesday, December 9, 2026.
I'm a realtor, not a mortgage broker, so talk to your lender about your own mortgage. If you'd like to talk through what this means for selling or buying a home in London, call me at 519-870-8104 or visit shaneharrison.ca.
Sources: Bank of Canada, interest rate announcement and Monetary Policy Report, October 28, 2026; National Bank of Canada, prime rate announcement, October 28, 2026; RBC, Bank of Canada interest rate update, October 28, 2026; Canadian Mortgage Trends, October 1, 2026. Payment example calculated on a 25-year amortization with semi-annual compounding.
Shane Harrison, REALTOR®, Sales Representative, The Realty Firm Inc., Brokerage, London, Ontario. 519-870-8104. shaneharrison.ca.
This article is general information, not legal, tax or financial advice.
