The Bank of Canada Sees Inflation Near 3% Through 2027: What That Means for a Renewal

What the Bank actually said

The Bank of Canada raised its overnight target by a quarter point to 2.5% on October 28. The decision came with a new set of projections, and those are worth reading more closely than the headline.

According to the Bank's own announcement, consumer price inflation has been around 3% since April and is expected to rise to about 3½% by the end of the year. Excluding gasoline, inflation was 2.2% in September, and the Bank says measures of core inflation remain close to 2%.

The Bank then projects that inflation averages 3% in 2027, a full percentage point above its July projection, before easing to 2% around the middle of 2028. It describes the persistence of inflation as a product of higher-for-longer energy prices and more cost pass-through from businesses.

The growth picture it sits beside

The same release puts growth at 3.3% in the second quarter and about 2% in the third, then expects a slowdown in the fourth quarter because of new U.S. tariffs. For the year the Bank projects growth of 1% in 2026 and 2% in each of 2027 and 2028. It also says housing is expected to remain relatively weak, and that unemployment has been around 6½% for several months.

That combination is the reason the Bank is moving one decision at a time. Inflation pushes toward higher borrowing costs. Weak housing and tariff-hit sectors push the other way. Governor Tiff Macklem told reporters the Bank may need to raise again but would take each decision as it comes, as reported by Bloomberg through Canadian Mortgage Trends.

A forecast is not a plan for your mortgage

The Bank says plainly that considerable uncertainty surrounds its projection, and it names the two biggest sources: developments in the Middle East and how businesses respond to higher costs. A renewal decision made as if the forecast were a certainty inherits all of that uncertainty without any of the caveats.

• If your mortgage renews in the next six to twelve months, the question is what payment you can carry at several outcomes, not which forecast is right.
• A shorter term gives you another decision point sooner. It also gives you another renewal on the lender's terms, which is a cost of its own.
• A longer term fixes your payment for longer. It also commits you if circumstances change, and the penalty to leave early depends on your lender's formula.

Our guide to the 120-day renewal window covers when lenders send offers and what you can do with them before they expire.

Test your own file at more than one outcome

Pick three scenarios for your own renewal. A payment at today's offer. A payment if your borrowing cost were a full percentage point higher. A payment if it were a half point lower. If all three fit your monthly budget with room to spare, your choice of term is mostly about preference. If only one fits, that tells you where the real risk in your file sits.

The mortgage calculators on this site use Canadian semi-annual compounding for fixed terms and monthly for variable, so the figures match how your lender calculates. The results are illustrations, subject to your lender's final terms.

If your renewal is a few months out and you are unsure whether to stay or switch, switching lenders at renewal explains why a straight renewal and a switch are treated differently on qualifying.

What to watch next

The Bank's next decision is scheduled for December 9, according to Canadian Mortgage Trends. Between now and then, the October inflation report and the next jobs release will each move expectations. None of them changes the arithmetic of your own mortgage, but they can change what lenders offer.

If you want a second set of eyes on a renewal offer, Mortgage Renewal explains how we review one.