On October 28, 2026, the Bank of Canada raised its target for the overnight rate by 25 basis points to 2.5%, with the Bank Rate at 2.75% and the deposit rate at 2.45%. Governor Tiff Macklem said in his opening statement that this is the first interest rate increase since July 2023.
- Policy rate: 2.5%, up from 2.25% (announced October 28, 2026).
- Prime rate at RBC, TD and National Bank: 4.70%, up from 4.45%, effective October 29, 2026.
- Bank of Canada inflation forecast: CPI inflation of about 3½% by the end of 2026 and an average of 3% in 2027.
- Next scheduled rate announcement: December 9, 2026.
Why the Bank raised rates
The Bank said CPI inflation has been around 3% since April, pushed up by persistently high oil prices and refinery margins, and is expected to rise to about 3½% by year end. Excluding gasoline, inflation was 2.2% in September and core measures remain close to 2%. The concern is spillover: the Bank said it raised the rate "to reduce the risk that continuing high energy prices spread broadly to the prices of other goods and services."
Growth has also been firmer than expected. GDP grew 3.3% (annualized) in the second quarter and recent indicators point to about 2% in the third. The Bank now projects growth of 1% in 2026 and 2% in 2027 and 2028, while warning that new US tariffs are expected to slow the fourth quarter. Governing Council said there "could be a need to increase the policy rate further," but that it will proceed carefully and take decisions one meeting at a time.
What it means for mortgage holders
Lenders moved quickly. RBC, TD and National Bank each announced a 25-basis-point increase in prime to 4.70%, effective October 29, 2026. Other lenders set their own prime rates and timing, so borrowers should check their own lender's notice.
- Variable rate with adjustable payments: the payment usually rises when prime rises.
- Variable rate with fixed payments: the payment may stay the same while more of it goes to interest, which slows repayment of the balance.
- HELOCs and other prime-based lines of credit: the interest rate usually rises with prime.
- Fixed-rate mortgages: the rate is unchanged until renewal. New fixed rates follow bond yields more than the policy rate.
Our interpretation: the Bank's language leaves room for another increase but does not commit to one. Any forecast of the December 9 decision is uncertain.
What to do next
Look for your lender's notice of the new rate and payment, and compare it with your budget. If you have a variable rate with fixed payments, check your statement or contract for your trigger rate. People renewing in the next few months can run their numbers through the mortgage renewal calculator or the fixed vs variable calculator, and a mortgage broker can compare options across lenders.
Sources
- Bank of Canada, Bank of Canada raises the policy rate by 25 basis points to 2½%, 2026-10-28. Accessed 2026-10-29.
- Bank of Canada, Monetary Policy Report Press Conference Opening Statement, 2026-10-28. Accessed 2026-10-29.
- RBC Royal Bank (via Cision), RBC Royal Bank announces change to prime rate, 2026-10-28. Accessed 2026-10-29.
- TD Canada Trust (via Cision), TD Canada Trust announces change to TD Prime Rate, 2026-10-28. Accessed 2026-10-29.
- National Bank of Canada, National Bank of Canada increases its prime rate, 2026-10-28. Accessed 2026-10-29.
General information only, not financial advice. Rates and terms vary by lender and borrower.
