Bank of Canada Raises Its Rate: What Actually Moves Your Mortgage Rate Now
The Bank of Canada raised its overnight rate by 0.25% today, to 2.50%. It is the first increase since July 2023, and it ends a run of 7 consecutive holds. Prime rate moves from 4.45% to 4.70%, effective October 29, so Variable rate mortgages and other Prime-based borrowing are directly affected by this decision.
That is the easy part. The more useful conversation is why the Bank moved, what it means for fixed rates, and what happens next.
Why the Bank Raised
The Bank is worried about inflation coming back through energy costs. Higher fuel prices are raising production and transportation costs for businesses. So far, many businesses have absorbed those increases, but the Bank expects more of them to be passed on to consumers over the next year.
Core inflation is still close to 2%, but the outlook has changed: the Bank now expects inflation to average about 3% in 2027 and not return to 2% until around mid-2028. September inflation already came in at 3.1%.
In other words, this was a precautionary increase - the Bank moved now to stay ahead of inflation it expects later, not because today's inflation numbers forced its hand.
Will the Bank Move Again?
The Bank did not commit to a series of increases. It said it will assess the situation one meeting at a time.
Further increases are possible if energy costs stay high and more of those costs reach consumer prices. If energy prices ease or demand weakens, the Bank could hold. Both paths are open, and anyone telling you they know which one is coming is guessing.
The next announcement is December 9, 2026.
The Part Most People Get Wrong
Here's the mechanic that trips up even experienced homeowners: the Bank of Canada's overnight rate and your fixed mortgage rate are not directly connected.
Variable rates are priced off prime rate, and prime rate moves in lockstep with the Bank of Canada's overnight rate. When the Bank holds, prime holds, and your variable rate holds with it. This is a direct, immediate relationship. If you have a variable rate mortgage, today's announcement is the whole story.
Fixed rates are priced off something different: the 5 yr Government of Canada bond yield, plus a lender spread that typically runs 1.5% to 2%. Bond yields move every business day based on what investors expect for inflation, economic growth, and risk, not based on the Bank of Canada's eight scheduled announcements a year. That's why you'll often see fixed rates shift in weeks when the Bank hasn't said a word.
This is why "the Bank of Canada held, so rates aren't changing" is only half true. It's accurate for variable. It's not necessarily accurate for fixed.
What's Been Happening in the Bond Market
The 5 yr Government of Canada bond yield has been climbing for months on the same inflation concerns behind today's decision, and it sits around 3.6% this week. Lenders have already passed much of that increase through to fixed pricing - that is why fixed rates rose through the fall while the Bank of Canada was still on hold.
If bond yields keep climbing, expect fixed rates to follow. If yields ease back, fixed rates have room to come down, again independent of what the Bank of Canada does at its next meeting.
Prime Rate History since 2010
If you are like me, and you like to look at numbers, here is a table summarizing the Prime Rate changes in Canada from 2010 to today:
| Effective Date | Prime Rate | Change |
|---|---|---|
Oct 28, 2026 | 4.70% | +0.25% |
Sept 02, 2026 | 4.45% | 0.00% |
July 15, 2026 | 4.45% | 0.00% |
June 11, 2026 | 4.45% | 0.00% |
April 29, 2026 | 4.45% | 0.00% |
March 18, 2026 | 4.45% | 0.00% |
Jan 28, 2026 | 4.45% | 0.00% |
Dec 10, 2025 | 4.45% | 0.00% |
Oct 29, 2025 | 4.45% | -0.25% |
Sept 17, 2025 | 4.70% | -0.25% |
July 30, 2025 | 4.95% | 0.00% |
June 04, 2025 | 4.95% | 0.00% |
April 16th, 2025 | 4.95% | 0.00% |
| March 12th, 2025 | 4.95% | -0.25% |
| Jan 29th, 2025 | 5.25% | -0.25% |
| Dec 11th, 2025 | 5.45% | -0.50% |
| October 23, 2024 | 5.95% | -0.50% |
| Sept 4, 2024 | 6.45% | -0.25% |
| July 24, 2024 | 6.70% | -0.25% |
| June 5, 2024 | 6.95% | -0.25% |
| July 12, 2023 | 7.20% | +0.25% |
| June 8, 2023 | 6.95% | +0.25% |
| January 25, 2023 | 6.70% | +0.25% |
December 8, 2022 | 6.45% | +0.50% |
| October 27, 2022 | 5.95% | +0.50% |
| September 8, 2022 | 5.45% | +0.75% |
| July 14, 2022 | 4.70% | +1.00% |
June 2, 2022 | 3.70% | +0.50% |
April 14, 2022 | 3.20% | +0.50% |
| March 3, 2022 | 2.70% | +0.50% |
| March 30, 2020 | 2.45% | -0.50% |
| March 17, 2020 | 2.95% | -0.50% |
| March 5, 2020 | 3.45% | -0.50% |
October 25, 2018 | 3.95% | +0.25% |
| July 12, 2018 | 3.70% | +0.25% |
| January 18, 2018 | 3.45% | +0.25% |
| September 7, 2017 | 3.20% | +0.25% |
| July 13, 2017 | 2.95% | +0.25% |
| July 16, 2015 | 2.70% | -0.15% |
| January 28, 2015 | 2.85% | -0.15% |
| September 9, 2010 | 3.00% | +0.25% |
| July 21, 2010 | 2.75% | +0.25% |
| June 2, 2010 | 2.50% | +0.25% |
What this means for you as a borrower?
If you are in a Variable rate mortgage, your rate increased by 0.25% effective October 29. If your payment adjusts with Prime, that is about $13.50 more a month for every $100,000 you owe. If your payment is fixed, the payment stays the same, but more of it goes to interest and less to principal.
If you are in a fixed rate mortgage, nothing changes during your term.
If you are shopping for a fixed rate or approaching renewal, the number to watch is the 5 yr bond yield, not the next Bank of Canada date circled on your calendar. Bond yields can move a fixed rate up or down well before or after any announcement.
And if your renewal is in the next 4 months, it is worth reviewing your options before the December 9 announcement, while rate holds are available.
Need help understanding how this affects your mortgage?
Let’s connect for a quick chat - I’ll walk you through what this decision means for your specific situation.
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