Last verified: October 29, 2026
The Bank of Canada raised its policy interest rate by 0.25 percentage points on October 28, taking the overnight target from 2.25% to 2.50%. The change took effect on October 29. RBC and TD also moved their standard prime rates from 4.45% to 4.70% effective the same day.
The immediate cost falls on borrowers with variable-rate mortgages, home equity lines of credit and other prime-linked loans. A fixed-rate mortgage does not change during its current term, although the rate available at renewal may be different.
This was the Bank’s first rate increase since July 2023. The October 28 rate announcement said inflation is proving higher and more persistent than previously expected, while economic growth has been stronger than the Bank forecast in July.
What changed on October 29
| Rate | Before | From October 29 | Change |
|---|---|---|---|
| Bank of Canada overnight target | 2.25% | 2.50% | +0.25 percentage points |
| Typical major-bank prime rate | 4.45% | 4.70% | +0.25 percentage points |
Each lender sets its own prime rate. RBC and TD both confirmed a 4.70% prime rate effective October 29. A loan priced at prime minus 0.75%, for example, would move from 3.70% to 3.95% if the lender passed through the full increase. The discount or premium in the loan agreement normally stays the same.
A $500,000 adjustable mortgage rises about $68 a month
The table below shows the calculated effect of a 0.25-percentage-point increase on an adjustable-payment variable mortgage. It assumes 25 years remain on the amortization and compares a 4.00% rate with a 4.25% rate. Actual payments depend on the mortgage balance, remaining amortization, payment frequency, contract rate and lender calculation.
| Mortgage balance | Payment at 4.00% | Payment at 4.25% | Monthly increase | Annual increase |
|---|---|---|---|---|
| $300,000 | $1,578.06 | $1,618.98 | $40.92 | $491.04 |
| $500,000 | $2,630.10 | $2,698.30 | $68.20 | $818.40 |
| $700,000 | $3,682.14 | $3,777.62 | $95.48 | $1,145.76 |
PaycheckGuru calculation: The examples use monthly payments and the Canadian mortgage convention of nominal interest compounded semi-annually. They illustrate the quarter-point change rather than a particular lender’s product.
For a $500,000 balance, the calculated payment rises by $68.20 a month. That is $818.40 over 12 months if the balance and rate stayed unchanged. A real mortgage balance declines over time, and another rate decision could change the result.
Fixed-payment variable mortgages work differently
Some variable-rate mortgages have an adjustable payment, so the required payment rises after the interest rate changes. Others keep the scheduled payment fixed. With a fixed-payment variable mortgage, more of the same payment goes to interest and less pays down principal when the rate rises.
The Financial Consumer Agency of Canada warns that a fixed-payment variable mortgage can reach a trigger rate. That is the point where the payment no longer covers the interest due. The lender may then require a higher payment, a lump-sum contribution or another change under the mortgage agreement.
Borrowers should check the current contract rate, trigger rate, remaining amortization and the interest-versus-principal breakdown on the next statement. A payment that does not change is not the same as a mortgage that is unaffected.
A line of credit costs $25 more a year per $10,000
Many home equity and personal lines of credit are priced from the lender’s prime rate. If the full 0.25-percentage-point increase applies, the simple additional annual interest is:
| Outstanding balance | Calculated extra interest per year | Monthly equivalent |
|---|---|---|
| $10,000 | $25.00 | $2.08 |
| $25,000 | $62.50 | $5.21 |
| $50,000 | $125.00 | $10.42 |
| $100,000 | $250.00 | $20.83 |
PaycheckGuru calculation: Balance × 0.0025. The table assumes the balance remains unchanged for a full year and excludes compounding, fees and daily balance changes.
The effect on a credit card depends on the agreement. Many cards use a stated fixed annual rate rather than prime, so their interest rate does not automatically rise with the Bank of Canada decision.
Current fixed mortgages do not reprice today
A fixed mortgage keeps its contracted interest rate until the term ends. The October 29 change therefore does not increase the payment on an existing fixed-rate term.
It can still matter at renewal. Fixed mortgage pricing responds more directly to Government of Canada bond yields and lenders’ funding costs than to a single overnight-rate decision. Borrowers renewing soon should compare offers rather than assume every fixed rate will move by exactly 0.25 percentage points.
Higher borrowing costs also affect how much income a household needs to carry housing expenses. PaycheckGuru’s guide to the income needed to afford rent explains the common 30% housing-cost benchmark, while our September inflation analysis shows why gasoline and household costs were already pressuring budgets before this rate increase.
Why the Bank raised the rate
The Bank said consumer price inflation had been around 3% since April and could reach about 3.5% by the end of 2026. Its October Monetary Policy Report projects average CPI inflation of 3.1% in 2027, compared with 2.0% in the July projection.
Higher oil prices, refinery margins and imported input costs are raising transportation and production expenses. The Bank said businesses have absorbed much of the increase so far, but survey evidence points to more cost pass-through over the next year.
The Bank also judged economic activity to be more resilient than expected. It estimated second-quarter growth at 3.3% and projected about 2% growth in the third quarter, although it still identified excess supply and expected new U.S. tariffs to slow fourth-quarter activity.
Governor Tiff Macklem said another increase could be needed, but the Bank will proceed carefully and decide one meeting at a time. The next scheduled rate decision is December 9, 2026.
What borrowers should check now
- Confirm whether the loan is fixed, adjustable-payment variable or fixed-payment variable.
- Check the lender’s new prime rate and the effective date shown in the account or agreement.
- For a variable mortgage, review the new payment or the amount going to principal.
- For a fixed-payment variable mortgage, find the trigger rate and remaining amortization.
- For a HELOC or line of credit, multiply the current balance by 0.0025 for a simple estimate of the added annual interest.
- If the higher cost strains the budget, contact the lender early and compare the cost of available options before changing the mortgage contract.
Sources: Bank of Canada, October 28 interest-rate announcement, October 2026 Monetary Policy Report and policy-rate history; Financial Consumer Agency of Canada, mortgage interest guidance and managing rising interest rates; RBC and TD prime-rate notices. Accessed October 29, 2026.
This article provides general information. Mortgage and credit agreements differ, and the lender’s contract and account notice control the actual rate, payment and effective date.