Policy rate rises to 2.50%: what the October 28, 2026 decision means.

On October 28, 2026, the Bank of Canada announced a 25-basis-point increase in its policy rate, from 2.25% to 2.50%, effective October 29, 2026. What this means for homeowners and buyers depends primarily on their mortgage contract. [1] [2]

When was the last increase, and when was the rate last at 2.50%?

Before this announcement, the most recent increase was on July 12, 2023, when the Bank raised the policy rate from 4.75% to 5.00%. The October 28, 2026 announcement is therefore the first increase in more than three years. [3]

The most recent period at 2.50% was much closer. On September 17, 2025, the Bank announced a cut from 2.75% to 2.50%. That rate was in effect from September 18 through October 29, 2025, inclusive. A further cut, announced on October 29, brought it to 2.25% effective October 30, 2025. [4] [5]

Announcement dates and effective dates are different: since 2021, a policy rate change takes effect the following day. The rate discussed here is the target for the overnight rate. [2]

Why is the Bank raising its rate?

The Bank points to more persistent inflation pressures and the risk that elevated energy costs spread to other goods and services. It says further increases may be needed, while emphasizing uncertainty. That is not a commitment to a particular decision at the next meeting. [1]

The policy rate influences borrowing costs across the economy. Higher rates can slow borrowing and spending, helping contain inflation. A 2.50% policy rate is not a mortgage rate available to borrowers. Lenders set their own rates and conditions. [6]

25 basis points = 0.25 percentage point. A rate moving from 4.00% to 4.25%, for example, rises by 25 basis points. It does not mean the payment rises by 25%.

What this could mean for your mortgage

A variable rate with adjustable payments

Your rate is generally based on your lender’s prime rate, plus or minus the spread in your contract. If prime increases, your rate and payments may increase under the agreed terms. Check your lender’s notice and the date of the next adjustment. [7]

A variable rate with fixed payments

An unchanged payment does not mean an unchanged cost: more may go toward interest and less toward principal. At your trigger rate, the payment no longer reduces principal; above it, the payment may not cover all interest. The action required depends on your contract. [8]

A fixed rate, or a renewal coming up

The rate on an existing fixed-rate mortgage stays the same during its term. New fixed-rate offers depend partly on bond yields and lenders’ funding costs; they do not automatically rise by 0.25 percentage point with every policy rate increase. At renewal, assess the new contract against your current needs. [7] [9] [10]

Three useful checks before making a decision

1. Review your contract. Confirm your rate type, how payments adjust and your renewal date.
2. Revisit your budget. Compare several scenarios and keep a reserve for unexpected expenses.
3. Compare the terms before switching. Look at the rate, penalties, potential fees and prepayment privileges. A policy rate increase alone is not enough reason to convert to a fixed rate.

The next scheduled announcement is December 9, 2026. Its outcome is not known at publication. [2]