Bank of Canada Raises Rates to 2.5%: What It Means for Ottawa Buyers, Sellers and Homeowners
The first rate hike since 2023 is here. Here's what changed, why the Bank did it, and how it affects your mortgage and your next move in the Ottawa market.
On October 28, 2026, the Bank of Canada raised its key interest rate by a quarter point, from 2.25% to 2.5%. It's the Bank's first increase since July 2023 and the first change of any kind in about a year, after seven straight decisions to hold.
Most economists saw this coming, but that doesn't make it less important if you have a variable-rate mortgage, a renewal on the horizon, or plans to buy or sell in Ottawa. Below we break down the announcement in plain language and what we think it means for you.
(up 0.25%)
since April
by year-end
announcement
Why the Bank of Canada Raised Rates
In short: energy prices. The conflict in the Middle East is now in its eighth month with no clear end in sight, and oil prices have stayed stubbornly high. That has kept Canada's headline inflation around 3% since April, and the Bank now expects it to climb to roughly 3.5% by the end of the year.
The Bank pointed out that inflation excluding gasoline was 2.2% in September, and its core inflation measures are still near its 2% target. So why act now? Because cost pressures are starting to build underneath. Higher fuel prices are pushing up the cost of producing and shipping goods, imported input costs are rising, and the Bank's own surveys suggest businesses will pass more of those costs on to customers over the next year.
The Bank's goal: stop high energy prices from spreading into the prices of everything else. This hike is meant to get ahead of that before it takes hold.
The Bank also sees the economy holding up better than expected. Canada's GDP grew 3.3% in the second quarter, with about 2% growth expected in the third. Consumer spending has been solid and business investment has rebounded. That stronger footing gave the Bank room to raise rates without worrying as much about tipping the economy over.
Updated Forecasts at a Glance
| Measure | 2026 | 2027 | 2028 |
|---|---|---|---|
| Canadian GDP growth | 1% | 2% | 2% |
| CPI inflation | ~3.5% by year-end | 3% average | Back to 2% by mid-year |
Source: Bank of Canada, October 28, 2026 rate announcement and Monetary Policy Report.
The Bank expects growth to slow in the last few months of 2026 because of new U.S. tariffs, then pick up again in 2027. Notably for our industry, it expects housing to remain relatively weak in the near term.
Will Rates Go Up Again?
Possibly. The Bank said plainly that further increases may be needed, but that it will proceed carefully given how uncertain things are, especially around the Middle East and Canada-U.S. trade. The next decision is on December 9, 2026, and the next full forecast comes on January 27, 2027.
Our read: this isn't a return to the rapid-fire hikes of 2022 and 2023. Rates are still low by historical standards. But the direction has changed, and it's smart to plan with that in mind.
What This Means for You in Ottawa
You'll feel it first
Lenders typically move their prime rate in step with the Bank. As a rough guide, a 0.25% increase adds about $14 a month for every $100,000 owing on a 25-year amortization. If your payment is fixed, more of it will now go to interest instead of principal.
No change today
Your rate and payment stay the same until renewal. If you're renewing in the next 6 to 12 months, start comparing options early. Fixed rates follow bond yields, which have already moved higher since the summer.
Lock in your rate
Get a pre-approval with a rate hold (usually 90 to 120 days) to protect yourself if rates rise again in December. With the Bank expecting a softer housing market, buyers may find more choice and more room to negotiate in Ottawa.
Price it right from day one
Higher rates trim what some buyers can afford. Homes that are well-prepared and priced to the current market still sell, but overpricing and waiting it out is riskier now. A clear pricing strategy matters more than ever.
Investors and landlords: run your numbers again at today's rates, and stress-test them at a higher one. Ottawa's rental demand remains steady, but tighter cash flow on variable-rate or upcoming-renewal properties is worth planning for now rather than later.
Smart Moves to Make This Week
- Check your mortgage type and renewal date. Know exactly what you have and when it comes up.
- Call your lender or mortgage broker if you're variable to confirm your new payment, or to ask about locking in.
- Buyers: get pre-approved now with a rate hold, before the December 9 decision.
- Sellers: get an up-to-date market evaluation based on today's buyer conditions, not last spring's.
- Don't panic. A quarter point is a modest move. Decisions based on a clear plan beat decisions based on headlines.
Frequently Asked Questions
What is the Bank of Canada's interest rate now?
As of October 28, 2026, the Bank of Canada's target for the overnight rate is 2.5%, up from 2.25%. The Bank Rate is 2.75% and the deposit rate is 2.45%.
Will my mortgage payment go up?
If you have a variable-rate mortgage with adjustable payments, likely yes, once your lender adjusts its prime rate. If you have a fixed-rate mortgage, your payment won't change until renewal.
When is the next Bank of Canada rate announcement?
The next scheduled announcement is December 9, 2026. The next Monetary Policy Report will be released on January 27, 2027.
Is now a bad time to buy a home in Ottawa?
Not necessarily. Higher rates can mean less competition and more negotiating room. The key is buying within a comfortable budget, getting a rate hold, and stress-testing your payment at a higher rate.
Not Sure How This Affects Your Plans?
Whether you're buying, selling, renewing or just want to understand where the Ottawa market is heading, our team is happy to walk you through it. No pressure, just straight answers.
This article is for general information only and is based on the Bank of Canada's October 28, 2026 announcement. It is not financial or mortgage advice. Payment estimates are approximate and vary by lender, rate and amortization. Please speak with your lender or a licensed mortgage professional about your specific situation.
