Bank of Canada Raises Rate to 2.5% — October 28, 2026

Awdie MacKenzie • 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.

Awdie Mackenzie

Mortgage Broker

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How Property Type and Condition Influence Mortgage Financing

By Awdie MacKenzie • October 21, 2026
Why the Property Matters When You’re Qualifying for a Mortgage When qualifying for a mortgage, lenders typically look at four core areas: Income Credit Down payment or equity The property itself Most buyers focus heavily on income, credit, and savings—and for good reason. But even if those boxes are checked, the property can still determine whether a mortgage is approved. Why Lenders Care About the Property From a lender’s perspective, the property is the collateral for the mortgage. In the unlikely event of default, they need to know the home can be sold quickly and at fair market value to recover their funds. Because of this, lenders are careful about the condition, value, and marketability of any property they finance. Homes that are in poor repair, unconventional, or overpriced can raise red flags—even when the borrower is well qualified. Appraisals Are Always Part of the Process Every mortgage requires an appraisal to confirm value. Insured mortgages (through CMHC, Sagen, or Canada Guaranty) often use an automated valuation model completed online. Conventional mortgages typically require a full, on-site appraisal by a certified appraiser. This appraisal is not optional and happens after an offer is accepted—not at the pre-approval stage. Why Pre-Approvals Aren’t a Guarantee A pre-approval is a great first step, but it only assesses you, not the property. Once you’ve made an offer, the lender must approve the specific home you’re buying. Understanding this upfront helps avoid surprises and confusion later in the process. The Risk of Buying Without a Financing Condition In competitive markets, buyers sometimes remove financing conditions to strengthen their offer. However, this comes with risk. If the appraisal comes back low—or the lender is concerned about the property’s condition—you could be denied financing after the offer is firm. In that scenario, your deposit may be at risk. Buying a Home That Needs Work If you’re considering a property that isn’t in perfect condition, there are solutions. A purchase plus improvements program allows you to buy a home and include renovation costs in your mortgage. The process is structured and requires planning, but it can be an excellent way to turn a fixer-upper into a great long-term investment. Final Thoughts Mortgage approval isn’t based solely on your finances—the property matters just as much. Knowing this ahead of time helps you make smarter offers, reduce risk, and plan more effectively. If you’re buying a property that needs work or want clarity on how a lender may view a specific home, feel free to reach out. I’d be happy to walk you through your options and help you plan with confidence.

What You Need to Know About Mortgages and Parental Leave

By Awdie MacKenzie • October 14, 2026
If the title of this article caught your attention, chances are your family is growing. Congratulations. If you’re thinking now is the right time to move into a home that better fits your growing family—but you’re unsure how parental leave affects your ability to qualify for a mortgage—you’re in the right place. Here’s the good news. Qualifying for a mortgage while on parental leave is possible when it’s done correctly. When you work with an independent mortgage professional, lenders can often qualify you based on your return-to-work income , as long as you can provide documentation confirming you have guaranteed employment waiting for you. A word of caution If you walk into a bank branch and disclose that you’re currently on parental leave, there’s a chance the bank will only allow you to qualify using your parental leave income. That can significantly reduce your borrowing power. Parental leave income is typically limited to 55% of your previous earnings, up to a weekly maximum. Qualifying on that amount alone can restrict your options and impact the type of home you can purchase. Why lender choice matters One of the biggest advantages of working with an independent mortgage professional is choice . You’re not limited to one lender’s rules or products. Some lenders will allow you to qualify using 100% of your confirmed return-to-work income , which can make a meaningful difference in your approval amount and overall options. What you’ll need to qualify Most lenders will require an employment letter that includes: Employer name (preferably on company letterhead) Your job title Original start date (to confirm probation has been completed) Confirmed return-to-work date Guaranteed salary upon return Lenders want reassurance that your income will resume once parental leave ends. You may also be asked to provide income history from the past couple of years, which is standard for most mortgage applications. One important note Whether or not you actually return to work after parental leave is entirely your decision. From a mortgage perspective, qualification is based on having a confirmed position available to you at the time of approval. If you have questions about qualifying for a mortgage while on parental leave—or anything mortgage-related—please connect anytime. I’d be happy to walk you through your options and help you plan with confidence.