The Bank of Canada Hiked: What It Changes for Your Mortgage

What the Bank actually did on October 28

On 28 October 2026 the Bank of Canada raised its target for the overnight setting by 25 basis points to 2.5%, with its companion lending figure at 2.75% and its deposit figure at 2.45%. In its release the Bank said inflation has been higher and more persistent than it had assumed in July, that growth has picked up, and that the move is intended to reduce the risk of continuing high energy prices spreading into other goods and services. It also said there could be a need to go further, but that Governing Council agreed to proceed carefully given the uncertainties.

The quarter point is the headline. It is not the news. The news is sitting in the October Monetary Policy Report published the same morning, where the Bank's projections table now shows CPI inflation of 2.9% in 2026 and 3.1% in 2027, against the 2.5% and 2.0% it published in July. That 2027 figure is a full percentage point higher than the Bank's own forecast three months earlier. For 2028 it projects 2.2%.

The growth side moved too, but less dramatically: the same table shows real GDP growth of 1.0% in 2026 and 2.0% in both 2027 and 2028, up from 0.7% and 1.8% in July. The Bank attributes the upward growth revision mainly to consumption, with business investment helped by the federal Productivity Mega Deduction, partly offset by higher US tariffs, trade policy uncertainty and higher long-term yields.

Two kinds of mortgage pricing, two different clocks

The question people type the morning after a decision like this is "should I lock in before it goes up again?" The honest answer requires knowing where the two kinds of mortgage pricing come from, because they do not come from the same place.

• Variable follows the Bank's policy setting through each lender's prime, reprices almost immediately after a decision, and compounds monthly. Lenders set prime individually; it conventionally tracks the Bank's move, but it is a lender decision, not an automatic one.
• Fixed follows Government of Canada bond yields. Yields move on expectations, continuously, and often well ahead of the Bank \u2014 or instead of the Bank.
• Because this decision was widely anticipated, the fixed offer in front of you this afternoon already contains the market's working assumption about what comes next. You are not getting ahead of anything; you are buying something already priced.

What moves fixed pricing from here is not the next scheduled decision. It is the next surprise \u2014 a CPI print that lands away from where the market sat, a tariff development, a shift in how persistent the Bank sounds. This is also why a borrower can watch fixed quotes drift down on a day the Bank goes up and conclude the system is broken. It is not broken. It is two markets, on two clocks.

What a quarter point does to a real payment

Canadian fixed mortgages compound semi-annually, not in advance. The effective monthly factor is (1 + annual \u00f7 2) raised to the power of one-sixth, minus one \u2014 not the annual figure divided by twelve. On a 4.19% nominal contract that works out to a monthly factor of 0.3462%, not 0.3492%.

Take a $480,000 balance with 22 years of amortization remaining. At 4.19%, done correctly, the payment is $2,776.70 a month. At 4.44% \u2014 the same contract plus this week's quarter point \u2014 it is $2,840.93, a difference of about $64 a month. We are not going to tell you whether $64 is big or small; that depends entirely on the rest of your budget. We will tell you the number is right.

If you hold a fixed-payment variable, your statement will not mention this

This is the under-covered piece. On a fixed-payment variable mortgage, the payment does not move when the Bank moves. The split moves. Same $480,000 balance, payment held at $2,776.70: at a 4.20% variable, one month's interest is roughly $1,680 and $1,096.70 goes to principal. At 4.45%, interest is roughly $1,780 and principal drops to $996.70. At 4.70%, principal falls to $896.70. Your amortization quietly lengthens and nothing on the statement announces it.

On those illustrative figures, the point at which the payment stops covering the interest entirely sits somewhere near 6.94% \u2014 a long way from here, and we are not forecasting that anyone gets there. What changed on October 28 is the direction of travel, after roughly two years of movement the other way. If you have been assuming your amortization is shrinking on schedule, that assumption is now worth checking rather than carrying.

Our calculators will show you the split on your own balance in about two minutes, which is faster than waiting for a statement that was never designed to flag it.

What it does to a buyer's borrowing capacity

Uninsured borrowers are generally tested at the greater of the contract figure plus two percentage points or 5.25%. With contract pricing in the fours, the "plus two" branch binds and the 5.25% floor is beside the point \u2014 which means every quarter point on the contract is a quarter point on the qualifying figure too.

Illustratively: a household whose budget supports $2,600 a month over a 25-year amortization qualifies for roughly $399,300 at a 6.19% qualifying figure, and roughly $390,300 at 6.44%. That is about $9,000 of borrowing capacity, or 2.3%, per quarter point. It is a capacity number, not a cost number, and it is the honest answer to "what does this actually do to me as a buyer."

In Waterloo Region, Guelph, Cambridge and London, most purchases still sit below the insured threshold, which puts local first-time buyers on a different mechanical footing from a Toronto buyer \u2014 different default insurance treatment, different amortization eligibility, different qualifying path. If you are shopping, running a pre-qualification against the current qualifying figure beats recalculating from a headline.

When "just lock into a five-year fixed" is the wrong advice

The reflex after a hike is to take the longest fixed term on the sheet. For a lot of households that is defensible. For these four, it usually is not:

• Anyone likely to sell inside two years. Breaking a fixed term generally costs the greater of three months' interest or an IRD charge, and the IRD is worked out against a comparison figure the lender itself chooses. Two lenders quoting identical pricing are not offering identical contracts. A variable's breakage is conventionally three months' interest \u2014 a very different exposure.
• Anyone with a lump sum landing. An inheritance, a bonus, a property sale. Prepayment room and how it is structured matter more than a tenth of a point on the pricing.
• Anyone being offered an "early" renewal more than six months out. These often swap a short, flexible commitment for a long one at a moment when the lender, not you, picked the timing.
• Anyone whose purchase only works if the term is stretched. If the arithmetic needs the longest amortization and the longest term to clear, the issue is the purchase, not the term.

Penalty structure is the single most expensive clause most borrowers never read, and it is set at signing, not at breaking. That is the whole premise behind Penalty Protector Pro \u2014 understanding what an exit would cost before you need one, rather than discovering it in a discharge statement.

This is a renewal region before it is a purchase region

The households most affected locally are not buyers. They are people who signed in 2020 through 2022, renewed once into a short term while the Bank was cutting, and are coming up again now. For them the question is never abstract. It is a letter with a figure on it and a signature line, arriving in the same month the Bank moved for the first time in a long while. That is exactly the moment the default product wins by inertia.

There is a local wrinkle in the Bank's stated reasoning worth naming. The reason it gave was energy prices feeding into other goods and services. In southwestern Ontario that is not a macro abstraction \u2014 it is the commute between Kitchener and Toronto, natural gas through a Hespeler or old-east-London winter, and freight through a manufacturing and logistics corridor. The same pressure the Bank is responding to is squeezing the GDS and TDS cushion in household budgets here. Both sides of your file are moving at once.

The renewal window opens about 120 days out, and the useful work in it is not hunting a decimal. It is deciding what term fits your next four years, what the penalty structure does if life changes, how much prepayment room you actually need, and what the qualifying figure will do to you in 2031. Your lender's letter is a product. The answers to those four questions are a plan.