A BANK OF CANADA RATE HIKE IS LOOKING MORE LIKELY FOR OCTOBER 28
The Bank of Canada announces its next rate decision on Wednesday, October 28, and the odds of an increase have moved up over the past week. The Bank’s policy rate is 2.25 per cent. BMO, RBC Dominion Securities and Desjardins have each changed their forecasts and now expect a quarter-point increase to 2.50 per cent. Financial markets are putting the chance of a hike at roughly 80 per cent or higher.
Two Bank of Canada surveys helped drive the shift. Over 40 per cent of firms facing bigger-than-normal cost increases told the Bank they plan to pass them on to customers in the next 12 months, and about a quarter have already done so. Consumers’ five-year inflation expectations rose to 3.91 per cent, the highest since the second quarter of 2022. Headline inflation was 3.1 per cent in September, though the Bank’s preferred core measures averaged 1.9 per cent.
Not everyone agrees. CMHC chief economist Mathieu Laberge does not expect a rate increase this year. He argues that inflation driven by global energy prices is not something a Canadian rate hike can fix, and he sees a move around the end of the first quarter or early in the second quarter of 2027. Even RBC describes its own call as low conviction, with near-even odds between a hold and a hike.
What this means for your mortgage: prime is currently 4.45 per cent, and a quarter-point hike would take it to 4.70 per cent. If you have a variable rate, your payment stays the same, but more of it goes to interest and less to principal. If you have an adjustable rate, your payment itself goes up. An existing fixed rate does not change until renewal. Fixed rates are priced off the five-year Government of Canada bond yield rather than the Bank of Canada’s rate, and brokers are noting that lenders have already adjusted fixed pricing upward as yields have risen.
DESJARDINS FORECASTS A MODEST ONTARIO RECOVERY IN 2027
Desjardins is forecasting that Ontario home sales will rise about 5 per cent in 2027, to roughly 167,000 sales, and that the average price will rise 2.4 per cent to about $825,000. It also expects housing starts to increase by about 6 per cent to roughly 65,000 units, which would still be more than 30 per cent below 2021 and 2022 levels, and average rents to rise about 1.4 per cent. Desjardins senior economist Kari Norman describes Ontario’s market as weak today, even though buyers now have more choice and higher incomes.
The forecast depends on the path of interest rates. Desjardins expects two Bank of Canada rate hikes starting in late October, and Norman notes that higher rates feed directly into variable rate mortgages. U.S. tariffs and oil prices are the other main risks to the forecast.
What this means for your mortgage: a forecast is an estimate, not a result, and this one carries its own rate assumption. Prices and rates both shape the payment on a purchase, so a modest price increase paired with higher rates can mean a bigger monthly cost than the price change alone suggests. For variable rate holders, a hike means more of each payment goes to interest.
THE BANK OF CANADA’S NEW FORECASTING MODEL TRACKS MORTGAGE RENEWALS
The October 28 decision is the first to use the Bank of Canada’s new forecasting model, called Prima. Governor Tiff Macklem introduced it in a September 21 speech, and a Bank staff paper says it entered use in September and will be the primary model for the October 28 rate announcement and Monetary Policy Report. Prima treats mortgage interest costs as their own part of the consumer price index, with changes in market rates feeding through gradually as mortgages renew or refinance. It also gives housing demand, supply and financing a bigger role.
That puts the renewal wave closer to the centre of how the Bank reads inflation. CMHC’s chief economist said at the Mortgage Professionals Canada conference in Calgary that the renewal shock may be easing for some households, but the risk has not gone away. It has moved into lenders’ existing mortgage portfolios, particularly among first-time buyers who have seen prices fall.
What this means for your mortgage: a fixed rate mortgage does not feel a rate change until its term ends, so the full effect arrives at renewal. The renewal payment depends on your balance, the rate you are offered at the time, and your amortization. The Bank is now building that lag into its forecasts, and your maturity date is the starting point for knowing where you stand.
WHERE THINGS STAND
If you have a variable rate, a hike on Wednesday would mean more of your payment goes to interest. If you have an adjustable rate, your payment would go up. If you’re buying or renewing on a fixed rate, brokers are noting that lenders have already adjusted pricing upward as bond yields have risen.
Call or text 249-480-1249. HumberBayMortgages.ca.
Simon Browning | Mortgage Agent Level 2 | BRX Mortgage 13463
Sources: CMT News / Bloomberg (October 19, 2026); Canadian Mortgage Professional (October 17 to 22, 2026); CMT News / The Canadian Press (October 21, 2026); Bank of Canada staff analytical paper 2026-47, Prima overview; Desjardins; CMHC; Statistics Canada; Bank of Canada