Why Did the Bank of Canada Raise Interest Rates?

According to the Bank of Canada's October 28 announcement, the increase is intended to help control inflation.

Higher energy prices have increased transportation and production costs, putting additional pressure on Canadian households and businesses.

By increasing its benchmark rate, the Bank is attempting to limit how broadly those costs spread throughout the economy.

The policy-rate change takes effect October 29, 2026. Individual lenders determine when and how changes to their own prime rates take effect.

How Much Will a Variable Mortgage Payment Increase?

For homeowners with an adjustable-payment variable mortgage, an increase in their mortgage interest rate generally means a higher scheduled payment.

The following examples show the approximate impact if a lender increases its prime rate by 0.25 percentage points and the borrower's contractual mortgage rate rises by the same amount.

Hypothetical interest and APR: 4.00% increasing to 4.25% | Assumed mortgage term: 5 years | Remaining amortization: 25 years.

Illustrative calculation and APR disclosure: The interest rates and illustrative Annual Percentage Rates (APRs) are both 4.00% before and 4.25% after the assumed increase, based on no additional borrowing charges. Calculations use monthly principal-and-interest payments and semi-annual interest compounding. Where additional borrowing charges apply, the APR may be higher than the stated interest rate.

Figures are independently rounded to the nearest $5. Annual figures assume the increased payment continues for 12 months without further rate or payment changes. These are hypothetical payment comparisons, not current lender rates or mortgage offers. Actual changes depend on the mortgage balance, interest rate, remaining amortization, payment frequency and lender's calculation method.

What Happens If You Have a Fixed-Payment Variable Mortgage?

Not every variable mortgage has a payment that changes when interest rates move.

Some lenders offer variable-rate mortgages where the scheduled payment remains the same even when interest rates rise or fall.

When rates increase, a greater portion of your payment goes toward interest, leaving less money to reduce the principal. That matters because your mortgage balance may decrease more slowly than originally expected.

If rates rise far enough, you could also reach your mortgage's trigger rate or trigger point, potentially requiring an increased payment, a lump-sum contribution or another adjustment under your mortgage agreement.

An unchanged monthly payment does not necessarily mean the rate increase has no financial impact.

Learn more in the Bank of Canada's explanation of variable mortgages and trigger rates.

How Much More Will a HELOC Cost?

Most home equity lines of credit have variable interest rates tied to the lender's prime rate.

Unlike a traditional mortgage, a HELOC generally charges interest only on the amount you've borrowed, not your total approved credit limit.

If your HELOC rate increases by 0.25 percentage points, here's what the additional interest could look like:

These figures assume the balance remains unchanged for the full year and the rate increases by exactly 0.25 percentage points. Monthly figures are averages, rounded to the nearest $5. Actual charges depend on daily balances, billing periods and lender terms.

One important consideration: If you're making interest-only payments on your HELOC, those payments do not reduce the amount you've borrowed.

A modest increase in borrowing costs can become more significant when combined with a large outstanding balance and no regular principal repayment.

For more information, see my guide to home equity lines of credit in Ontario.

What If You Have a Fixed-Rate Mortgage?

If you already have a fixed-rate mortgage, today's Bank of Canada increase does not change your contracted interest rate during your existing term.

Your rate remains fixed until the end of that term, unless you make a change to the mortgage agreement.

However, homeowners approaching renewal should understand that fixed mortgage rates are influenced by factors such as Government of Canada bond yields, lender funding costs and market expectations.

They don't necessarily move in the same direction or by the same amount as the Bank of Canada's overnight rate.

If your mortgage is renewing in the next several months, this is a good opportunity to review your options rather than automatically accepting the first renewal offer.

Read more about mortgage renewals in Ontario.

What Should Ontario Homeowners Do Now?

A rate increase doesn't automatically mean you need to change mortgages. However, it is a good reason to review your current financing.

Start by checking your latest mortgage or HELOC statement.

For a variable mortgage, confirm your current rate, the lender's applicable prime rate, your adjustment to prime, and whether your payments are fixed or adjustable. Also review your remaining amortization and any trigger-rate provisions.

If you have a HELOC, pay particular attention to the outstanding balance, the interest rate and whether your regular payments are reducing principal.

If your mortgage is approaching renewal, consider reviewing fixed and variable options based on your current budget, future plans and tolerance for payment changes.

And if rising borrowing costs are creating pressure on your monthly cash flow, a mortgage review may help determine whether maintaining your existing arrangement, adjusting your payments or exploring other financing options makes sense.

The goal isn't simply to find the lowest payment today. It's to choose a mortgage structure that remains manageable over time.

Frequently Asked Questions

Did the Bank of Canada raise interest rates on October 28, 2026?

Yes. The Bank of Canada increased its overnight policy rate by 0.25 percentage points, from 2.25% to 2.50%. The policy change takes effect October 29, 2026.

Is a 25-basis-point increase the same as a 25% increase?

No. Twenty-five basis points equals 0.25 percentage points. For example, a mortgage rate increasing from 4.00% to 4.25% has increased by 25 basis points, not 25%.

Is my bank's prime rate now 4.70%?

Not necessarily. Although a lender moving from a 4.45% prime rate to 4.70% would reflect a full quarter-point increase, each lender sets and publishes its own prime rate. Check your lender's current rate and its effective date before calculating the impact on your mortgage or HELOC.

Will a $500,000 variable mortgage cost $70 more per month?

In the hypothetical example above, yes. An adjustable-payment mortgage with a $500,000 balance, a rate increasing from 4.00% to 4.25%, and 25 years remaining on amortization would have a monthly payment increase of approximately $70.

Your actual increase may differ. Fixed-payment variable mortgages may not experience an immediate scheduled-payment increase.

How much more interest will I pay on a $100,000 HELOC?

If your HELOC interest rate increases by 0.25 percentage points and you maintain a $100,000 outstanding balance, the additional annual interest would be approximately $250, or around $20 per month on average.

Should I switch from a variable mortgage to a fixed mortgage?

Not automatically. Switching may provide greater payment certainty, but the decision depends on available rates, remaining mortgage term, penalties or conversion provisions, and your financial goals.

A rate increase alone is not enough information to determine whether changing your mortgage is worthwhile.

The Bottom Line for Ontario Homeowners

The Bank of Canada's October 28, 2026 rate increase is a reminder that borrowing costs can change, even after a period of relatively stable interest rates.

For some homeowners, the immediate impact may be a modest increase in monthly payments. For others, it may mean paying more interest without seeing any change to their scheduled mortgage payment.

The important question isn't simply how much the Bank of Canada raised rates. It's how that change affects your mortgage, your cash flow and your longer-term plans.