October 30, 2026 | By Livian Smith, Mortgage Broker
The Bank of Canada has raised its overnight lending rate by 0.25%, bringing it to 2.50% following its October 28, 2026 announcement.
For Canadians with variable-rate mortgages, those approaching renewal, or anyone considering purchasing a home, this news may have raised a few concerns.
But before making any decisions about your mortgage, it’s important to understand why rates increased, what economists are saying, and what this could mean for your financial future.
The good news? A rate increase doesn’t automatically mean it’s time to panic or change your mortgage strategy.
Let’s look at the bigger picture.
Why Did the Bank of Canada Raise Interest Rates?
According to the Bank of Canada’s October 28 announcement, the decision to increase rates was largely influenced by persistent inflation and rising energy costs.
While higher interest rates can create challenges for borrowers, the Bank of Canada is attempting to prevent rising energy prices from spreading further into the cost of everyday goods and services.
Here are some of the key economic highlights reported following the announcement:
- Economic growth remains resilient. Canada’s GDP grew by 3.3% in the second quarter, exceeding the Bank of Canada’s expectations.
- Inflation remains a concern. Consumer price inflation has been hovering around 3%, with projections suggesting it could reach approximately 3.5% by the end of 2026.
- Consumer spending remains relatively strong. Despite economic uncertainty, Canadians continue to contribute to economic growth.
- Housing affordability remains challenging. Higher borrowing costs, construction expenses, and slower population growth are expected to influence housing activity over the coming years.
The important takeaway is that the Bank of Canada is responding to economic conditions, not necessarily signalling the beginning of another prolonged cycle of interest rate increases.
However, future decisions will depend on inflation, employment, economic growth, and global developments.
What Is Dr. Sherry Cooper Saying About Canada’s Economy?
Dr. Sherry Cooper, Chief Economist for Dominion Lending Centres, recently shared her perspective on Canada’s economic outlook.
One of the encouraging observations is that Canada’s economy has demonstrated considerable resilience despite ongoing trade tensions with the United States.
Canada has experienced consecutive periods of positive trade growth and continues developing relationships with new trading partners.
However, there are still challenges.
Employment conditions have weakened, particularly for younger Canadians entering the workforce, and uncertainty surrounding international trade continues to influence economic confidence.
When it comes to housing, Dr. Cooper also highlighted an interesting shift in mortgage preferences.
More Canadians are choosing mortgage terms shorter than five years.
This suggests borrowers are increasingly interested in maintaining flexibility rather than committing to longer mortgage terms during uncertain economic conditions.
And that brings us to an important question.
Should You Choose a Fixed or Variable Mortgage Rate Right Now?
This is probably one of the most common conversations I’m having with clients.
And my answer hasn’t changed.
The right mortgage isn’t necessarily the one with the lowest advertised rate. It’s the one that supports your financial situation, comfort level, and long-term goals.
Variable-rate mortgages have offered attractive opportunities for many borrowers, particularly those who secured lower rates before this latest increase.
Even with a 0.25% increase, some borrowers may still be benefiting from rates below comparable fixed-rate options.
But variable rates also come with uncertainty.
For example, on a $500,000 mortgage amortized over 25 years, a 0.25 percentage point rate increase would translate to approximately $70 more per month if the payment were recalculated at the higher rate.
For borrowers with static-payment variable mortgages, the monthly payment may remain unchanged while more of that payment goes toward interest and less toward principal.
That’s an important distinction.
Fixed-rate mortgages, on the other hand, offer payment stability and protection against further rate increases during the mortgage term.
Neither option is automatically better.
The key is understanding the numbers, the risks, and how each option fits your circumstances.
Is Now Still a Good Time to Buy a Home in British Columbia?
There is another side to this conversation that often gets overlooked.
While higher interest rates can affect affordability, they can also influence buyer competition and seller expectations.
Dr. Cooper noted that home prices have remained relatively flat in parts of the Canadian market, while new listings have declined.
For qualified buyers, certain market conditions may create opportunities to negotiate more favourable purchase terms.
Consider this:
A slightly higher mortgage rate doesn’t necessarily eliminate the opportunity to purchase a property at a competitive price.
And unlike your purchase price, your mortgage rate can potentially change over time through renewal, refinancing, or other available options.
Of course, purchasing a home should never be based solely on the expectation that interest rates will eventually decline.
Your mortgage payment needs to be affordable today, with room in your budget for unexpected expenses or future rate changes.
For buyers in Coquitlam, Port Coquitlam, Port Moody, Vancouver, and throughout British Columbia, understanding your purchasing power before entering the market remains one of the most valuable steps you can take.
What Should You Do If You Already Have a Variable-Rate Mortgage?
First, don’t make a rushed decision based on one Bank of Canada announcement.
If you currently have a variable-rate mortgage, there are a few things worth reviewing:
- Your current rate. How does it compare with the fixed-rate options available to you?
- Your monthly payment. Will your payment increase, or will the allocation between interest and principal change?
- Your remaining mortgage term. How much time do you have before renewal?
- Your financial flexibility. Could your budget comfortably accommodate additional increases?
- Your long-term plans. Are you considering selling, refinancing, or making changes to your property?
One thing I always encourage clients to understand is that locking into a fixed rate isn’t automatically the safest financial decision.
It provides certainty, but that certainty can come at a cost.
Depending on your mortgage terms, locking in may mean accepting a higher interest rate, and breaking a fixed-rate mortgage later can sometimes result in substantial penalties.
Before making that decision, let’s review the numbers together.
What Happens Next With Canadian Interest Rates?
The reality is that nobody can predict with certainty where interest rates will go over the next 12 months.
The Bank of Canada will continue evaluating inflation, employment, consumer spending, energy prices, and international economic conditions.
Additional rate increases are possible if inflationary pressures persist.
On the other hand, weaker economic growth or declining inflation could eventually create conditions for rates to stabilize or decrease.
That’s why I believe mortgage decisions should be built around a strategy rather than predictions.
A good mortgage strategy considers where you are today, where you want to be in three to five years, and how to protect your financial flexibility along the way.
My Final Thoughts
Interest rate announcements tend to generate attention, and understandably so. Your mortgage is likely one of your largest financial commitments.
But one rate increase doesn’t tell the entire story.
Whether you’re purchasing your first home, renewing your mortgage, refinancing, or simply wondering if your current mortgage still makes sense, this is an opportunity to review your options rather than react out of fear.
You don’t need to predict the market perfectly. You need a mortgage strategy that works for you.
If you’re unsure how this latest Bank of Canada announcement affects your mortgage, I’m happy to walk through the numbers with you so you can make an informed decision.
Let’s have a conversation about your mortgage strategy.
Livian Smith is a licensed mortgage broker serving clients throughout British Columbia, including Coquitlam, Port Coquitlam, Port Moody, Vancouver, and surrounding communities.
Economic commentary informed by the October 28, 2026 Bank of Canada announcement and insights shared by Dr. Sherry Cooper, Chief Economist at Dominion Lending Centres.
This article is intended for general educational purposes. Mortgage rates, payment changes, product availability, and lending options depend on individual circumstances and lender terms. All financing is subject to lender approval.