By Bank of Canada Raised Rates to 2.50%: What It Means for Your Mortgage, GIC and Savings
On October 28, 2026, the Bank of Canada raised its policy rate by 0.25 percentage points, from 2.25% to 2.50% — its first increase since July 2023. The major banks answered by moving their prime rate to 4.70%. If you hold a variable-rate mortgage or a HELOC, your interest cost went up within days. If your mortgage renews in the next year, the rate you are offered just got a little more expensive. And if you keep money in savings accounts or GICs, the same decision slowly pushes your interest earnings up. This guide translates one quarter-point move into real dollars for each of those situations.
What the Bank of Canada actually decided on October 28
| Rate | Before | Since October 28, 2026 |
|---|---|---|
| Policy rate (overnight target) | 2.25% | 2.50% |
| Bank Rate | 2.50% | 2.75% |
| Deposit rate | 2.20% | 2.45% |
| Big-bank prime rate | 4.45% | 4.70% |
The reason was inflation that refuses to finish cooling. The Bank noted that CPI inflation has been around 3% since April and is expected to rise to about 3.5% by the end of the year, pushed up by persistently high energy prices. Core inflation is still close to 2%, but the Bank’s surveys suggest businesses will pass more of their higher fuel and transport costs on to customers over the next year. In the Bank’s words, Governing Council raised the rate “to reduce the risk that continuing high energy prices spread broadly to the prices of other goods and services.” It also signalled that another increase is possible — “there could be a need to increase the policy rate further” — while promising to proceed carefully and decide one meeting at a time. The next decision is Wednesday, December 9, 2026.
Two details matter for households. First, this was not a reaction to a booming economy the Bank wants to cool at any cost: it forecasts growth of just 1% in 2026, with unemployment around 6.5%. Second, the Bank expects inflation to average 3% through 2027 and only return to its 2% target in mid-2028 — which is why nobody should budget on the assumption that rates will fall quickly.
Variable-rate mortgages: the increase lands this month
A variable rate is priced off your lender’s prime rate, so when prime rises 0.25%, your mortgage rate rises 0.25%. On an adjustable-rate variable mortgage your payment changes right away; on a fixed-payment variable, the payment stays the same but more of it goes to interest and your amortization stretches.
Here is what the quarter point does to a typical variable mortgage priced at prime minus 0.50% — that is, 4.20% before the decision and 4.45% after — with 25 years of amortization remaining. These are our calculations using standard Canadian semi-annual compounding:
| Mortgage balance | Payment at 4.20% | Payment at 4.45% | Difference |
|---|---|---|---|
| $300,000 | $1,610.75/month | $1,652.09/month | +$41.34/month |
| $500,000 | $2,684.59/month | $2,753.48/month | +$68.89/month |
On a $500,000 balance, that is about $827 more over a year — real money, but not the shock of 2022–23, when the policy rate went from 0.25% to 5.00% and payments on the same mortgage rose by well over $1,000 a month. If you want your own numbers, our mortgage payment calculator lets you run your exact balance, rate and amortization in seconds.
HELOCs and other prime-based borrowing
Home equity lines of credit are almost always priced at prime plus a small margin, and they reprice immediately. On a $50,000 HELOC balance carried at prime, interest was $2,225 a year at 4.45%; at 4.70% it is $2,350 — an extra $125 a year, or about $10.42 a month. Variable-rate personal loans, some car loans and many student and small-business credit lines follow the same pattern. Credit cards, by contrast, do not move with the policy rate: their rates are set by the card issuer and were already near 20% or more.
Renewing a mortgage in 2026 or 2027
If your term is ending, this decision reaches you differently. Fixed mortgage rates are set from Government of Canada bond yields, not directly from the policy rate — but bond yields rose around this decision because markets now expect rates to stay higher for longer. Practically, that means:
- Renewal offers are drifting up, not down. A borrower who was hoping to renew below the rate on a 2021-era term should plan around today’s offers, not last spring’s. Our guide to mortgage renewal in 2026 walks through the negotiation and switching steps that still save money even in a rising-rate market.
- Variable is no longer the “obvious” discount it was. With the Bank openly saying a further increase is possible, the gap between fixed and variable offers deserves a real comparison rather than a habit.
- Start 4–6 months early. A rate hold from another lender costs nothing and protects you if the December 9 decision goes the same way as October’s.
GICs and savings accounts: the other side of the hike
Higher policy rates are bad for borrowers and good for savers — eventually. High-interest savings account rates are set by each bank and usually follow the policy rate with a lag of days to weeks, and not always by the full amount. GIC rates follow bond yields, which have also risen, so new GIC offers and renewal offers are improving. To see the scale: if your bank passed the full quarter point through on $25,000 of savings, that is $62.50 more interest a year. On $100,000 laddered into GICs as they renew at rates 0.25% higher, it is roughly $250 a year. Compare current offers before assuming your bank moved: our pages on the best high-interest savings accounts and the best GIC rates in Canada track what the major providers actually pay.
One caution for savers: with inflation expected to average 3% in 2027, a savings account paying well under that still loses purchasing power. The hike narrows the gap; it does not close it.
What to do next
If you have a variable mortgage or HELOC: check whether your payment changed or whether interest is quietly eating more of a fixed payment. If your amortization has stretched far beyond the original schedule, a modest voluntary payment increase now is far cheaper than catching up later.
If you renew within six months: get a competing rate hold today, and run both the fixed and variable offers through a payment calculator before you sign. Do not let the term simply auto-renew at the posted offer.
If you are mostly a saver: wait a few weeks, then re-shop your savings account and any maturing GICs. Banks pass increases through unevenly, and the gap between the best and worst offers is usually bigger than this quarter point.
If you carry credit-card debt: nothing about this decision changes your math — your rate was already the expensive one in the household. It stays the first debt to attack.
Frequently asked questions
What is the Bank of Canada policy rate right now?
2.50%, set on October 28, 2026 — up from 2.25%, where it had stood since October 29, 2025. The Bank Rate is 2.75% and the deposit rate is 2.45%. The next scheduled decision is December 9, 2026.
Why did the Bank of Canada raise rates in 2026?
Inflation has been stuck around 3% since April 2026 and is expected to reach about 3.5% by year-end, driven mainly by high energy prices. The Bank raised the rate to keep those energy costs from spreading into the prices of other goods and services, even though core inflation is close to 2% and the economy has some slack.
Does a rate hike change my fixed-rate mortgage?
No. A fixed-rate mortgage keeps its rate and payment until the term ends. The hike matters to you at renewal, because new fixed offers are priced from bond yields that have risen alongside the Bank’s move.
How much does a 0.25% increase add to a mortgage payment?
On a $500,000 variable mortgage with 25 years left, about $69 a month (from $2,684.59 to $2,753.48 at prime minus 0.50%). On $300,000, about $41 a month. The exact figure depends on your balance, rate and remaining amortization.
Will savings account and GIC rates go up too?
Generally yes, but with a lag and not always by the full 0.25%. Savings account rates are each bank’s own decision; GIC rates follow bond yields, which rose around this decision. Re-check your rates a few weeks after any Bank of Canada move rather than assuming they adjusted.
When is the next Bank of Canada decision?
December 9, 2026 — the last scheduled announcement of the year. The following Monetary Policy Report, with updated forecasts, comes on January 27, 2027.
The bottom line
A quarter-point hike is a nudge, not a shock — roughly $69 a month on a $500,000 variable mortgage and $125 a year on a $50,000 HELOC — but the direction is what changed. After a year of holding at 2.25%, the Bank of Canada is raising again and says more may come. Borrowers renewing in the next six months should lock in competing offers early; savers should re-shop their rates once banks finish passing the increase through.
