November 1, 2026 | Sean Humphries
A few borrowers contacted me after the Bank of Canada’s October 28 rate hike. They’re about to close on their homes, they’ve chosen a variable mortgage, and now they’re second-guessing that choice.
Their question: Are we heading back to 2022?
It’s understandable. But another increase doesn’t necessarily mean another rapid tightening cycle.
Why this looks different from 2022
During 2022, the Bank raised its policy rate from 0.25% to 4.25%. That’s four full percentage points in nine months. Inflation peaked at 8.1% that June.
Supply disruptions and soaring global food and energy prices were part of the problem. But demand was also strong enough to outstrip what the economy could supply. The Bank was dealing with an overheated economy alongside those supply shocks.
As of the October 2026 announcement, core inflation remained near 2%, and the economy still had spare capacity. That’s a meaningful difference.
The Bank also estimates its neutral policy rate at 2.25%–3.25%: the long-run level consistent with inflation at target and an economy operating at capacity. The new 2.50% policy rate sits inside that range.
That range is a reference point, not a target or a ceiling on further hikes.
Why raise rates now?
The strongest argument concerns what happens next.
Businesses have absorbed much of their higher input costs, shielding consumers from some of those increases. But the Bank expects more of those costs to reach consumers. The Canadian economy has also been stronger than it anticipated, and it forecasts stronger annual growth in 2027.
This hike was as much about preventing inflation later as responding to conditions today.
I understand the concern. What I question is whether adding borrowing costs is necessary when higher energy bills already leave households with less to spend elsewhere.
After the last inflation surge, it’s reasonable to ask whether the risk of acting too late now weighs more heavily in the Bank’s decisions.
We can’t know how much avoiding another round of criticism influenced this move. But we can question whether the insurance is worth its cost.
If inflation would have eased without this hike, Canadians will have paid for protection they didn’t need. If acting early prevents a more persistent inflation problem, it could spare them greater hardship later.
That’s the Bank’s bet. It isn’t a guaranteed outcome.
Should variable borrowers switch to fixed?
For some borrowers, the fixed rate available is about one percentage point higher than their variable rate. That’s a meaningful premium for certainty.
Four quarter-point increases would close that starting gap. But they wouldn’t automatically make fixed the cheaper choice.
The timing of those increases, how long rates remain elevated, and the savings accumulated beforehand all matter.
Fixed rates also have an American problem. A resilient U.S. economy and persistent inflation are helping keep upward pressure on bond yields on both sides of the border. Canadian economic weakness alone may therefore be insufficient to deliver lower fixed mortgage rates.
I discussed the impact on variable borrowers and mortgage choices with Jacqueline Hansen on Global News:
The decision comes back to your household. Variable may offer a lower starting cost, but you need room for further increases. Fixed provides payment certainty at the rate offered today.
Your mortgage needs to work even if the rate forecast is wrong.
How much further could rates rise?
My expectation, following the October announcement, is that another hike will be seriously considered in December or January. But I see room for a slower, more limited approach than we experienced in 2022.
I’m not yet convinced that four or five increases will be necessary.
I’ll be watching whether price increases spread beyond energy, spending keeps surprising to the upside, and hiring and wage pressures strengthen. Those developments would make a stronger case for further hikes.
What could this mean for home prices?
I don’t see this hike putting upward pressure on prices. My expectation is that it encourages some buyers to pause, keeping a lid on prices and potentially leaving those still shopping with more choice.
In 2022, borrowing costs rose rapidly while home prices were high. Buyers lost purchasing power quickly, and some could no longer qualify for the homes they wanted.
A quarter-point increase is a much smaller change. My base case is subdued prices and continued buyer choice, rather than a repeat of that sudden affordability shock. That could change if rates rise much further.
Wondering whether to stay variable or choose fixed? I can help compare your actual offers, payments and costs under different rate scenarios, so the decision reflects your budget and plans.
Book a Free Consultation to compare mortgage options.