Canadian Mortgage Market Update: Bank of Canada Raises Rates as Fixed Mortgage Rates Climb
October 29, 2026 | By Emily Miszk, Mortgage Broker, BRX Mortgage
If you've been watching mortgage rates and wondering what's next, this week's economic news is worth paying attention to.
Inflation is rising again, the Bank of Canada has increased its overnight lending rate, and we're also seeing fixed mortgage rates move higher.
For Canadians preparing to purchase a home, renew their mortgage or refinance, the conversation around interest rates is changing.
For much of the past few years, we've been focused on when mortgage rates would come down. Now, we're facing a different question: Could borrowing costs continue to rise?
Let's look at what's happening in Canada, what we're seeing south of the border, and what it means for your mortgage.
Bank of Canada Raises Interest Rates by 0.25%
On October 28, 2026, the Bank of Canada announced a 0.25% increase to its overnight lending rate, bringing it to 2.50%.
This was the first rate increase since July 2023, and it reflects growing concern about inflation.
According to Statistics Canada, inflation reached 3.1% in September, up from 3.0% in August. Much of this increase is being driven by energy prices, with gasoline costs rising significantly.
While inflation excluding gasoline remains more manageable at 2.2%, the Bank of Canada is concerned that sustained increases in energy prices could eventually push up the costs of other goods and services.
Think about it this way: when transportation and production become more expensive, those added costs can eventually show up in everything from groceries to household essentials.
The challenge is that Canada's economy is still navigating uncertainty, particularly around international trade and tariffs.
Higher interest rates can help control inflation, but they also make borrowing more expensive for households and businesses.
The Bank of Canada now expects inflation to reach approximately 3.5% by the end of 2026 and remain elevated through much of 2027.
What this means for your mortgage: If you have a variable-rate mortgage, you may see your borrowing costs increase following this announcement. Depending on your mortgage structure, that could mean a higher payment or more of your existing payment going toward interest.
If you're currently in a fixed-rate mortgage, your contracted interest rate won't change during your term. However, if your mortgage is coming up for renewal, the rates available today may look different from what you were expecting earlier this year.
Fixed Mortgage Rates Are Also Moving Higher
This is something I really want homeowners and buyers to understand.
While the Bank of Canada's announcement directly influences variable borrowing costs, fixed mortgage rates are influenced more heavily by the bond market.
And right now, we're seeing upward pressure on both.
Government of Canada bond yields have been climbing, and lenders are responding by increasing some of their fixed mortgage rates.
For context, the Government of Canada's benchmark five-year bond yield increased from 3.50% on October 22 to 3.62% on October 28.
That might not sound like a significant move, but changes in bond yields can influence how lenders price fixed-rate mortgages.
Higher bond yields, inflation concerns, global uncertainty and expectations around future interest rates are all contributing to this environment.
Here's the important distinction:
Variable mortgage rates are generally tied to lender prime rates, which are influenced by Bank of Canada policy decisions.
Fixed mortgage rates are primarily influenced by bond yields, market expectations and lender pricing.
Existing fixed-rate mortgages remain protected from rate changes until the end of their contracted term.
This means fixed rates can increase even when the Bank of Canada isn't making an announcement.
For anyone currently shopping for a home or approaching a mortgage renewal, I wouldn't recommend assuming today's fixed-rate options will necessarily be available a few months from now.
It's worth reviewing your options early and understanding whether securing a rate hold makes sense for your situation.
What's Happening in the United States Matters to Canadian Borrowers
It's easy to look at Canadian mortgage rates as something determined entirely by what's happening here at home.
But our financial markets are closely connected to the United States and the broader global economy.
In September, U.S. inflation reached 3.7%, according to the Bureau of Labor Statistics.
The U.S. Federal Reserve also increased its benchmark interest rate by 0.25 percentage points in September, responding to continued inflationary pressures.
American mortgage rates have moved higher as well. According to Freddie Mac, the average U.S. 30-year fixed mortgage rate reached 7.32% as of October 22.
Although Canadian and American mortgage products work differently, rising inflation, higher bond yields and changing investor expectations can influence borrowing costs on both sides of the border.
What I'm watching closely is how long these inflationary pressures persist.
If higher energy prices continue filtering into other areas of the economy, central banks may have less flexibility to reduce interest rates.
For Canadian borrowers, this is another reason to make mortgage decisions based on your financial goals and affordability rather than trying to predict exactly where rates will go next.
Toronto's Municipal Election: What Homebuyers Should Know About Land Transfer Tax
Another development worth mentioning for my Ontario clients is Toronto's municipal election.
On October 26, Olivia Chow was re-elected as Toronto's mayor.
During the campaign, mayoral candidate Brad Bradford proposed eliminating Toronto's municipal land transfer tax for qualifying home purchases priced at $1.1 million or less.
With his election loss, that particular campaign proposal is no longer moving forward as part of his mayoral platform.
For Toronto homebuyers, this is an important reminder that closing costs need to be part of your purchasing budget.
Unlike buyers in Mississauga and many other Ontario municipalities, purchasers buying within the City of Toronto generally pay both the provincial land transfer tax and an additional municipal land transfer tax.
Depending on your purchase price and eligibility for available rebates, this can represent a significant upfront expense.
And these costs generally need to be accounted for at closing rather than simply added to your mortgage.
Whether you're purchasing in Toronto, Mississauga, Kelowna or elsewhere in Ontario or British Columbia, understanding your total closing costs is just as important as understanding your down payment.
My Advice for Homebuyers and Homeowners Right Now
I've been working in the mortgage industry since 2009, and one thing I've learned is that the mortgage market is constantly changing.
The goal isn't to perfectly predict what interest rates will do next.
The goal is to make informed financial decisions based on your circumstances, your goals and the options available to you.
Here's what I would encourage you to think about right now.
If your mortgage is coming up for renewal:
Start reviewing your options early. Understand your current mortgage terms, what your payments could look like at today's rates, and whether changing lenders or mortgage products might benefit you.
If you're planning to purchase a home:
Build your budget around today's borrowing costs, not the possibility of lower rates in the future. And don't forget to account for property taxes, closing costs and the ongoing expenses of homeownership.
If you currently have a variable-rate mortgage:
Review how the latest Bank of Canada increase impacts your mortgage. Some variable mortgages have adjustable payments, while others maintain a fixed payment and change how much goes toward principal and interest.
If you're considering refinancing:
Look at the bigger financial picture. Whether you're consolidating debt, accessing equity for renovations or making changes to improve cash flow, it's important to understand the costs, penalties and long-term financial implications.
The Bottom Line: Planning Matters More Than Predicting
With inflation moving higher, the Bank of Canada increasing its overnight lending rate and fixed mortgage rates also climbing, this is a good time to review your mortgage strategy.
There is still a lot of uncertainty in the market, and nobody can tell you with certainty where mortgage rates will be six or twelve months from now.
But you can be prepared.
Whether you're purchasing your first home, growing your real estate portfolio, approaching renewal or simply reviewing your current mortgage, having a strategy makes a difference.
My role as a mortgage broker is to help you understand your options, compare mortgage products and make decisions that support both your immediate needs and your long-term financial goals.
You don't need to wait until your mortgage is up for renewal or you're ready to make an offer to start that conversation.
Ready to chat about your goals?Visit www.emilycallme.com
Emily MiszkMortgage BrokerBRX MortgageFSRA #13463
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