Canada interest rate rises to 2.5% in October 2026
The Bank of Canada raised its overnight rate target by 25 basis points to 2.5% on 28 October 2026, lifting financing costs for Canadian property buyers.
The facts
- The Bank of Canada raised its target for the overnight rate by 25 basis points to 2.5% on 28 October 2026; the Bank Rate moved to 2.75% and the deposit rate to 2.45%.
- CPI inflation has run near 3% since April and the Bank expects about 3.5% by the end of 2026; excluding gasoline, inflation was 2.2% in September.
- GDP growth is projected at 1% for 2026 and 2% for both 2027 and 2028, after 3.3% in the second quarter of 2026.
- Unemployment has stayed near 6.5% for several months and the Canadian dollar is around 71 US cents.
- The Monetary Policy Report projects residential investment growth of slightly less than 1% on average in 2027 and 2028, citing affordability limits, slow population growth and higher borrowing costs.
What it means for your money
- Variable-rate mortgages reprice within weeks of a policy move, so a buyer financing now pays more each month than in September.
- Glopra's data puts the Canadian average at $4,585 per m² with national rent at $25.31 per m² a month, a gross yield near 6.6%, while prices are 3.3% lower than a year ago — a rising policy rate meeting a falling price trend.
- Owners already holding Canadian property face renewal cost rather than entry cost: fixed terms maturing in 2027 reprice against a 2.5% policy rate instead of the 2.25% in force before this decision.
What to watch
- The next overnight rate announcement is 9 December 2026 and the next Monetary Policy Report 27 January 2027.
- Near-term household and business inflation expectations have risen while longer-term expectations remain anchored; the Bank named this as the reason for acting.
- Shelter services inflation is projected to rise from a little over 1% at the end of 2026 to about 2% in 2027, with easing rent inflation offsetting part of the increase.
Sources: Bank of Canada https://www.bankofcanada.ca/2026/10/fad-press-release-2026-10-28/; Bank of Canada https://www.bankofcanada.ca/publications/mpr/mpr-2026-10-28/canadian-outlook/