Bank of Canada Raises Rate to 2.5% — October 28, 2026
Bill Fraser • 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.
RECENT POSTS
You’ve found the right home, your offer’s been accepted, and your financing is approved—congratulations! But before you can pick up the keys and celebrate, there’s one more important stage: the closing process. Closing is the final step in your homebuying journey, where all the paperwork, legal details, and financial transactions come together. It can feel overwhelming if you don’t know what to expect, but with the right preparation, closing can be smooth and stress-free. Here’s a step-by-step guide to help you understand the process. Step 1: Hire a Lawyer or Notary A real estate lawyer (or notary, depending on your province) handles the legal side of closing. They will: Review the purchase agreement and mortgage documents Conduct a title search to confirm the seller has the legal right to sell the property Ensure the mortgage lender is properly registered on the title Handle the transfer of funds between you, the lender, and the seller Your lawyer or notary will be your main point of contact during closing, so choose one you trust and who communicates clearly. Step 2: Finalize Your Mortgage Your lender will send the mortgage instructions directly to your lawyer or notary. At this stage: You’ll provide proof of property insurance (lenders require this before releasing funds) You’ll confirm your down payment and closing costs are available in your lawyer’s trust account The lawyer will prepare all documents for your review and signature Step 3: Pay Closing Costs Closing costs typically range from 1.5% to 4% of the purchase price. These can include: Legal fees Title insurance Land transfer tax (where applicable) Adjustments for property taxes or utilities prepaid by the seller Home inspection or appraisal fees (if not already paid) Your lawyer will provide a final statement of adjustments so you know exactly how much is due on closing day. Step 4: Sign the Paperwork A few days before closing, you’ll meet with your lawyer or notary to sign all the necessary documents, including: Mortgage agreement Title transfer Insurance confirmations Statement of adjustments Bring valid government-issued ID to this appointment. Step 5: Transfer of Funds On the day of closing: Your lender sends the mortgage funds to your lawyer Your lawyer combines these funds with your down payment and pays the seller Legal ownership of the property is transferred into your name The lender is registered on title as a secured creditor Step 6: Get the Keys! Once the paperwork is filed and the funds have cleared, your lawyer will confirm that the transaction is complete. You’ll then get the keys to your new home—officially making it yours. The Bottom Line The closing process is a series of important steps, but with the right team in place, it doesn’t have to be stressful. By working closely with your mortgage professional and lawyer, you’ll have guidance every step of the way—from signing the documents to turning the key in the front door. If you’d like help preparing for the closing process—or want a clear breakdown of your own closing costs— connect with us today.
Alternative Lending in Canada: What It Is and When It Makes Sense Not everyone fits into the traditional lending box—and that’s where alternative mortgage lenders come in. Alternative lending refers to any mortgage solution that falls outside of the typical big bank offerings. These lenders are flexible, creative, and focused on helping Canadians who may not qualify for traditional financing still access the real estate market. Let’s explore when alternative lending might be the right fit for you. 1. You Have Damaged Credit Bad credit doesn’t have to mean your homeownership dreams are over. Many alternative lenders take a big-picture approach . While credit scores matter, they’ll also look at: Stable employment Consistent income Size of your down payment or existing equity If your credit has taken a hit but you can demonstrate strong income and savings—or have a solid explanation for past credit issues— an alternative lender may approve your mortgage when a bank won’t. Pro tip: Use an alternative mortgage as a short-term solution while you rebuild your credit, then refinance into a traditional mortgage with better terms down the line. 2. You're Self-Employed Being your own boss has its perks—but mortgage approval isn’t usually one of them. Traditional lenders require verifiable, consistent income—often two years’ worth. But self-employed Canadians typically write off significant expenses, reducing their declared income. Alternative lenders are more flexible and understanding of self-employed income structures. If your business is profitable and your personal finances are healthy, you may qualify even with lower stated income. Even if interest rates are slightly higher, this option is often worth it—especially when balanced against tax planning and business deductions . 3. You Earn Non-Traditional Income Today’s income sources aren’t always conventional. If you earn through: Airbnb rentals Tips and gratuities Rideshare or delivery apps (like Uber or Uber Eats) Commissions or contracts You might face challenges with traditional lenders. Alternative lenders are often more willing to work with these non-standard income streams , especially if the rest of your mortgage application is strong. Some will consider a shorter income history or evaluate your average earnings in a more flexible way. 4. You Need Expanded Debt-Service Ratios Canada’s mortgage stress test has made it harder for many borrowers to qualify with big banks. Alternative lenders can offer more generous debt-service ratio limits —meaning you might be able to qualify for a larger mortgage or a more suitable home, especially in competitive markets. While traditional GDS/TDS limits typically sit at 35/42 or 39/44 (depending on your credit), some alternative lenders will go higher, especially if: You have a larger down payment Your loan-to-value ratio is lower Your overall financial profile is strong It’s not a free-for-all—but it’s more flexible than bank lending. So, Is Alternative Lending Right for You? Alternative lending is designed to offer solutions when life doesn’t fit the traditional mold . Whether you're rebuilding credit, running your own business, or earning income in new ways, this path could help you get into a home sooner—or keep your current one. And here’s the key: You can only access alternative lenders through the mortgage broker channel . Let’s Explore Your Options Not sure where you fit? That’s okay. Every mortgage story is unique—and I’m here to help you write yours. If you’re curious about alternative mortgage products, want a second opinion, or need help getting approved, let’s talk . I’d be happy to help you explore the best solution for your situation. Reach out anytime. It would be a pleasure to work with you.
