The Bank of Canada Has Changed Direction. Should Your Mortgage Strategy Change Too?

For the first time in more than three years, the Bank of Canada has raised interest rates.

On October 28, the Bank increased its benchmark rate by 0.25 percentage points to 2.50%, ending a lengthy period of rate cuts and holds.

For Canadian homeowners, particularly those approaching a mortgage renewal, the decision raises an important question: Are we entering another period of rising mortgage rates?

The answer isn’t entirely clear. But the Bank’s latest announcement suggests borrowers should be preparing for a different interest rate environment than many anticipated just a few months ago.

Why Did the Bank of Canada Raise Rates?

The biggest concern is inflation.

Higher global energy prices, driven largely by the ongoing conflict in the Middle East, are increasing costs for Canadian businesses and consumers.

Gasoline and transportation costs are only part of the problem. When businesses pay more to produce, transport, and distribute goods, those additional costs can eventually make their way into consumer prices.

The Bank of Canada now expects inflation to average 3.0% in 2027, a full percentage point higher than it forecast in July. It doesn’t anticipate inflation returning to its 2% target until around the middle of 2028.

Meanwhile, Canada’s economy has performed somewhat better than expected, giving the Bank more room to address inflation.

The October increase was intended to prevent higher energy costs from developing into broader, more persistent inflation.

The Bank also made something clear: further interest rate increases may be necessary.

That doesn’t mean another hike is guaranteed, but it does represent a significant shift in the outlook.

What Does This Mean for Fixed and Variable Mortgage Rates?

The impact depends on the type of mortgage you have.

Variable-rate mortgages

Variable mortgage rates are generally tied to lenders’ prime rates, which typically move with the Bank of Canada’s policy rate.

As lenders adjust their prime rates following October’s announcement, borrowers with variable-rate mortgages can expect their interest costs to increase.

For homeowners with adjustable-rate mortgages, this generally means higher monthly payments.

For those with fixed-payment variable mortgages, payments may remain unchanged, but more of each payment will go toward interest and less toward principal. Depending on the mortgage terms, a payment adjustment may eventually be required.

Fixed-rate mortgages

Fixed mortgage rates work differently.

They are influenced primarily by government bond yields, particularly the five-year Government of Canada bond yield.

Those yields had already been rising ahead of the October announcement, putting upward pressure on fixed mortgage rates.

The U.S. election delivered a blue wave, which was followed by a decline in bond yields. That’s welcome news for Canadian homeowners, as lower bond yields help ease upward pressure on fixed mortgage rates. Events in the U.S., like the election, don’t directly set Canadian mortgage rates, but the downward shift could offer some relief.

The important distinction is that fixed rates can increase even when the Bank of Canada hasn’t changed its policy rate.

If you already have a fixed-rate mortgage, your contracted rate won’t change during your current term. However, borrowers purchasing a home or approaching renewal may face different rates than those available earlier this year.

Renewing Your Mortgage in 2027? Don’t Wait Until the Last Minute

For homeowners approaching renewal, the changing interest rate outlook deserves attention.

A mortgage renewal is an opportunity to review your financial position, compare lenders, and consider whether your existing mortgage structure still makes sense.

But waiting until your lender sends a renewal offer can limit your options.

Starting the process several months in advance gives you time to understand current rates, assess your qualifications, and explore alternatives.

This is particularly important for homeowners whose financial circumstances have changed or whose property values have declined.

In Brampton, where home prices have softened from previous highs, available equity may influence refinancing options. Homeowners hoping to consolidate debt, access equity or switch lenders should understand their position before their renewal date arrives.

And remember, your existing lender’s renewal offer isn’t necessarily the most competitive option available.

Should You Choose a Fixed or Variable Mortgage Now?

October’s rate hike has made this decision more complicated.

A fixed-rate mortgage offers predictable payments and protection against further rate increases during the term.

A variable-rate mortgage may offer a lower initial rate and greater flexibility, including the ability to convert to a fixed rate, subject to your lender’s terms, and lower penalties if you need to break your mortgage early. However, borrowers must be comfortable with the possibility of additional rate increases.

Neither option is automatically better.

The right decision depends on several factors, including your household budget, financial flexibility, plans for the property, and ability to manage changing payments.

For some borrowers, the certainty of a fixed rate may be worth the additional cost. Others may prefer the flexibility of a variable mortgage.

It’s also worth considering mortgage terms shorter than five years, depending on available pricing and your circumstances.

The goal is to choose a mortgage that works for your financial situation today while leaving you prepared for what could happen next.

What Are Economists Expecting Next?

The Bank of Canada’s next interest rate announcement is scheduled for December 9, 2026, and expectations are building for further hikes.

While economists differ on the timing and extent of additional increases, the outlook points to the possibility of further tightening in the months ahead. Financial markets are also anticipating further tightening, although the timing remains uncertain.

The Bank of Canada has emphasized that future decisions will depend on incoming economic data, particularly inflation. Two releases before December 9 will matter most:

Jobs report: Friday, November 6: Is Canada’s labour market remaining resilient, or is weakness becoming more apparent?

Inflation: Monday, November 16: Are higher energy costs spreading into other goods and services?

The Bank has indicated that future decisions will be made one meeting at a time. That makes incoming economic data especially important.

Even if the Bank holds rates in December, fixed mortgage rates could still move as bond markets adjust their expectations.

What Should Brampton Homeowners Do Now?

The October announcement is a reminder of how quickly the mortgage landscape can change.

Earlier this year, much of the discussion centred on when borrowing costs might decline further. Today, the conversation has shifted toward how much higher rates could go.

That doesn’t mean homeowners should rush into decisions.

It does mean having a plan matters.

If you’re renewing in 2027, purchasing a home or considering refinancing, now is a sensible time to review your options.

Understanding how different mortgage rates and terms affect your payments can help you decide based on your circumstances rather than trying to predict the Bank of Canada’s next move.

Let’s Review Your Mortgage Options

As a top Brampton mortgage broker, I work with homeowners and buyers to evaluate mortgage options, understand potential risks, and make informed financing decisions.

Whether your mortgage is up for renewal or you’re considering a purchase or refinance, I’d be happy to help you explore your options.