The Bank of Canada raised its key interest rate on October 28, from 2.25% to 2.5%. It's the first hike since July 2023, and yes, that's the same Bank that spent most of the last two years cutting. If you have a variable-rate mortgage or a line of credit, your borrowing cost is going up. If you have a fixed rate, nothing changes today. And if you're planning a move in the east end this winter or spring, this is worth five minutes of your time.
Here's the tea, and what it actually means for you.
What happened on October 28
The Bank of Canada raised its policy rate by 25 basis points (a quarter of a percent) to 2.5%. The rate had been sitting at 2.25% since the cut in October 2025, so this is the first move in a year and the first increase in more than three years.
The reason is energy prices. Inflation has hovered around 3% since April, and in September it came in at 3.1%. Gasoline was up 27.8% over the year. Take gas out of the picture and inflation was 2.2%, which is close to normal. The Bank is worried that high oil prices start leaking into the cost of everything else, so it raised rates to get ahead of that.
TD's economists described it as the Bank "taking out some insurance." I think that's a fair way to put it. This isn't 2022, when rates went up again and again in a hurry. It's one careful step, with a clear message that more could follow if inflation doesn't cool.
If you have a variable-rate mortgage or a HELOC
This is where you'll feel it first.
Lenders' prime rates are expected to rise by 0.25% right after the decision, and variable mortgages and lines of credit are priced off prime. According to Ratehub, the lowest five-year variable rate on the market was 3.45% and will likely move to around 3.70%.
What does a quarter point cost in real life? Here's my rough math on a 25-year amortization, going from 3.45% to 3.70%:
- 🏠 Per $100,000 of mortgage: about $13.50 more a month
- 🏡 On an $800,000 mortgage: about $108 more a month
- 🏘️ On a $1.2 million mortgage: about $162 more a month, or roughly $1,940 a year
Translation: annoying, not catastrophic. It's a couple of nice dinners out on the Danforth every month, not a reason to panic-sell.
One thing to know: many variable mortgages have a fixed payment. Your payment stays the same, but more of it goes to interest and less to your principal. So you might not notice anything on your bank statement, but you're paying the house down a bit slower. Call your lender and ask which kind you have. It's a two-minute call and it's worth knowing.
If you have a fixed-rate mortgage
Nothing changes until you renew. Your rate is locked for your term.
Fixed rates aren't set directly by the Bank of Canada. They follow government bond yields, and those already climbed in September and October because investors saw this hike coming. Ratehub had the best five-year fixed at 4.34%. So if you're renewing in the next few months, the hike is largely already baked into the offers you're seeing.
If your renewal is coming up in 2027, start the conversation with your mortgage broker or bank about four to six months ahead. That's not a sales line. Shopping your renewal early is one of the easiest ways to save real money, and most people just sign whatever shows up in the mail.
If you're buying your first home
Your pre-approval matters more than ever this week. If you got pre-approved on a variable rate, your numbers may have shifted a little. Ask your lender to re-run them before you fall for a semi on a pretty street in Leslieville.
The good news, and I'll be honest that there is some, is that the market isn't racing away from you. In September, TRREB reported 5,040 home sales across the GTA, down 9% from a year earlier. The average price was $1,006,409, compared with $1,060,036 the year before. Buyers are in a bit of a holding pattern, which means more time to look, more room to negotiate, and fewer bidding wars on the average house.
If you're an upsizer (selling and buying)
This is our favourite kind of move, so let me be direct.
When you sell and buy in the same market, a rate change hits both sides. Your buyer pool for the starter semi in Riverdale or the townhouse near Gerrard may get a little more cautious. At the same time, the bigger detached house in the Upper Beach you've got your eye on is facing the same cautious buyers. Prices aren't running up on you.
What changes is the size of your new mortgage. Going from a $1.2 million home to a $1.7 million home usually means carrying a much bigger loan, so a quarter point shows up more on your side than on the first-time buyer's. Run the payment at today's rate and at a rate half a point higher. If both numbers still let you sleep at night, the hike shouldn't stop you. If only the first one works, that's your answer too.
We'll always tell you the truth, even when it's not what you want to hear. Sometimes the right move is to wait a season. Sometimes it's to go now, while there's less competition for the house you love.
Will rates go up again?
Prediction, not a promise: maybe once more.
The Bank said there "could be a need to increase the policy rate further," but that it will "proceed carefully." It expects inflation to reach about 3.5% by the end of the year, average 3% in 2027, and get back to 2% by mid-2028. TD expects one more quarter-point hike in early 2027, which would put the rate at 2.75%, and thinks the bar for anything beyond that is high.
The next decision is December 9, 2026. I'll be watching it, and I'll tell you what it means when it lands.
What this means for you
- Variable or HELOC: your cost is going up a little. Call your lender and ask how your payment works.
- Fixed: nothing changes until renewal. Start shopping four to six months ahead.
- First-time buyer: get your pre-approval re-run. The market is giving you room to breathe.
- Upsizer: stress-test your new mortgage at half a point higher. If it still works, the hike shouldn't decide your move for you.
Basically, this is a speed bump, not a wall. Toronto demand hasn't gone anywhere. People still want the porch, the yard, and the walk to the park. What's shifted is confidence, and confidence comes back fastest when you know your numbers.
FAQ
Did the Bank of Canada raise interest rates in October 2026?
Yes. On October 28, 2026, the Bank of Canada raised its policy rate by 0.25% to 2.5%. It was the first increase since July 2023.
Does the rate hike affect my fixed-rate mortgage?
Not until you renew. A fixed rate stays the same for your whole term. Fixed rates follow bond yields, which had already risen ahead of the hike.
How much more will I pay on a variable-rate mortgage?
Roughly $13 to $14 more a month for every $100,000 you owe, on a 25-year amortization, if your rate rises by 0.25%. Some variable mortgages keep your payment the same and put more of it toward interest instead. Your lender can tell you which kind you have.
When is the next Bank of Canada rate decision?
December 9, 2026. The Bank said it could raise rates again but will proceed carefully. TD expects one more quarter-point hike in early 2027.
Let's talk numbers
If you're wondering what this means for your own move, whether that's your first place or the bigger house you've been dreaming about, send us a message or give us a call. We'll give you the honest read on your situation, no pressure. Thinking about your next chapter? We'd love to help you write it.
The payment estimates above are my own rough calculations for illustration only. Talk to your lender or mortgage broker for numbers based on your actual mortgage.
Sources
- Bank of Canada, "Bank of Canada raises the policy rate by 25 basis points to 2½%" (October 28, 2026): https://www.bankofcanada.ca/2026/10/fad-press-release-2026-10-28/
- MoneySense, "Bank of Canada raises interest rate to 2.5%: how will it affect you?": https://www.moneysense.ca/news/bank-of-canada-interest-rate-decision-announcement-october-28/
- TD Economics, Bank of Canada Interest Rate Announcement (October 28, 2026): https://economics.td.com/ca-boc-interest-rate-announcement
- RBC, Bank of Canada interest rate update (October 28, 2026): https://www.rbcroyalbank.com/en-ca/my-money-matters/money-academy/economics-101/understanding-interest-rates/bank-of-canada-interest-rate-announcement/
- CP24, "Greater Toronto home sales in September down from year ago, average price also lower" (October 6, 2026): https://www.cp24.com/local/toronto/2026/10/06/greater-toronto-home-sales-in-september-down-from-year-ago-average-price-also-lower/
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