The Bank of Canada raised rates to 2.5%. Here is what it means for GTA buyers and homeowners

On October 28, 2026 the Bank of Canada raised its policy rate by 0.25 points to 2.5%. It is the first increase since 2023, and prime moved to 4.5%. The trigger was inflation: the consumer price index rose 3.1% in September, pushed by gasoline.

What happened

The Bank had held at 2.25% for months. Energy prices pushed headline inflation above its 1% to 3% target band, so it moved. Governor Tiff Macklem said there could be a need to raise rates further, but that the Bank will proceed carefully.

If you have a variable rate

Your rate follows prime, so it went up 0.25 points right away. Ratehub expected the best 5-year variable to move from about 3.45% to about 3.70%. On a $618,480 mortgage over 25 years that is roughly $82 more a month. If you have a fixed-payment variable, your payment may not change, but more of it now goes to interest.

If you are shopping for a fixed rate

Fixed rates follow 5-year bond yields, not the Bank of Canada. Yields rose in September and October because markets expected this hike, so most of it was already priced in. The best 5-year fixed was about 4.34% on hike day.

If you renew in the next 12 months

Ask for a rate hold now. Most lenders hold a rate for 90 to 120 days at no cost, and if rates fall before you close, you take the lower one. Compare at least three offers; renewal letters are rarely the best rate.

The next decision: December 9

The next announcement is December 9, 2026. Another hike is possible but not certain. Plan with a 0.25 to 0.50 point buffer and you will not be caught off guard.

The angle most people miss

Hikes scare buyers off, and that is when negotiating power shifts. GTA sales in October were down 7.9% from a year earlier and the average price was down 2.7% to $1,024,108 (TRREB). Homes sold at 97% of asking. If your job and down payment are solid, a cautious market is a good one to buy in.

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