Are interest rates going up in Canada? Yes, and another increase is possible on December 9. The Bank of Canada raised its policy rate to 2.50% on October 28 because higher energy prices pushed inflation up. Here is what it means for Ontario buyers and homeowners.
What did the Bank of Canada do on October 28?
The Bank of Canada’s October 28 announcement raised the policy rate by 0.25 points to 2.50%. MoneySense reports this Bank of Canada rate hike is the first since July 2023. The Bank warned more increases could be needed but will proceed carefully, and it expects inflation near 3.5% by the end of 2026. Big banks then raised prime, the rate they charge their best borrowers, from 4.45% to 4.70%, Canadian Mortgage Professional says. The next decision is December 9.
Why are interest rates going up in Canada again?
Energy prices are the main reason. Statistics Canada reported inflation of 3.1% in September, with gasoline up 27.8%. Outside gasoline, prices rose just 2.2%, close to the Bank’s 2% target, which is why it says it will move carefully. The Bank raised rates to stop high fuel costs from spreading to other prices.
The U.S. Federal Reserve held its rate at 3.75%–4.00% on October 28, its statement shows, after raising it in September for the first time since 2023. Canadian fixed mortgage rates follow Government of Canada bond yields, which often move with U.S. yields.
What this means for your mortgage in Ontario
If you have a variable rate
Your variable rate follows prime, so it rises with the hike. The lowest five-year variable rate should move from about 3.45% to 3.70%, MoneySense says. In Ratehub’s example, a $666,538 home with 10% down becomes a $618,480 mortgage once insurance is added. Over 25 years, the payment rises by $82 a month, or $984 a year.
Monthly payment, $618,480 mortgage, 25-year amortization
Rate | Monthly payment |
3.45% | $3,072 |
3.70% | $3,154 |
If you are renewing in 2026 or 2027
Renewing in Ontario? Compare several offers early instead of accepting your bank’s first one, and book a free renewal review. Ratehub put the best five-year fixed at 4.34% on hike day. The fixed vs variable mortgage choice depends on your comfort with payment risk.
If you are buying your first home
Lenders check that you could still pay if rates rose. This is the stress test, and OSFI, the federal banking regulator, sets its minimum at the greater of your contract rate plus 2 points or 5.25%. At 4.34%, you would qualify at 6.34%.
What’s happening to Ontario home prices?
Buyers have more room to negotiate. TRREB’s October report shows Greater Toronto Area sales down 7.9%, with the average price at $1,024,108 (down 2.7%) and the benchmark price down 4.3%. In Ottawa, the Ottawa Real Estate Board reports a September average of $685,640 (down 1.0%), with sales down 7% so far in 2026. CREA expects Ontario’s 2026 average price to fall 3.0% to $809,334.
Area | Average price | Year over year |
GTA, October 2026 | $1,024,108 | −2.7% |
GTA condo apartments, October 2026 | $621,400 | −5.8% |
Ottawa, September 2026 | $685,640 | −1.0% |
Sources: TRREB and the Ottawa Real Estate Board. Browse Toronto condo listings.
Ontario’s HST rebate can help new-build buyers who will live in the home. It is a full rebate up to $1 million, a flat $130,000 from $1 million to $1.5 million, then shrinks to $24,000 at $1.85 million. It covers agreements signed April 1, 2026, to March 31, 2027, and you can now apply through the Canada Revenue Agency. Our first-time buyer guide explains more.
Will rates keep rising in 2027?
No one is able to accurately foretell rates. The Bank's Monetary Policy Report, released in October, projects that inflation will average around 3% in 2027, then ease toward 2% by mid-2028. Its greatest risks include the Middle East situation and the extent to which businesses will be able to raise prices. If energy prices fall and costs stay contained, pressure on rates could ease. If fuel stays expensive and prices spread, the Bank could raise rates again.
What should Ontario buyers and homeowners do now?
- As long as you get pre-approved and inquire with your lender about a rate hold (usually 90–120 days) in case the rate increases prior to closing, don't let that impact your budget.
- Check for offers if you're close to the end of your term, to give yourself time to do some shopping around.
- Make sure to know if your payment is fixed or variable, as this will help you understand how it will be impacted by a 0.25 point increase.
- Try out your budget at a rate one point higher than your offer; if you're being surprised by a second increase, then you're not following it.
- Buying a new build? Ask the builder if the Ontario HST rebate applies, since it could lower your cost.
- In a slower market, negotiate on price and conditions, but keep your inspection and financing conditions.
Frequently asked questions
Will the Bank of Canada raise interest rates again in December?
It is possible. The Bank said more increases could be needed but will proceed carefully. Its next decision is December 9, and the outcome depends on inflation, energy prices, and the Middle East conflict, so no one can say for sure.
What is the prime rate now?
After the hike, Canada’s big banks raised prime from 4.45% to 4.70% on October 29. Variable mortgage rates are set as prime plus or minus a discount, so they move with it. Check your lender’s exact discount to see your own rate.
Should I lock in a fixed mortgage rate now?
There’s no single right answer; it depends on how much payment risk you can handle. Variable rates follow prime and can rise again, while fixed rates stay put until renewal but currently start higher. A licensed mortgage professional can compare both.
Do Bank of Canada rate changes affect fixed mortgage rates?
Not directly. Fixed rates follow Government of Canada bond yields. Five-year yields were already near recent highs before the hike, which is why lenders have not lowered fixed rates, and the best five-year fixed was still about 4.34% on hike day.
The next decision is December 9. Book a free renewal review or a buyer consultation before then.
