The Bank of Canada raises its rate to 2.5%: what the October 28 hike means on the South Shore

It had been more than two years since I'd written this sentence: the Bank of Canada just raised its rate. On October 28 it moved up a quarter point, to 2.5%. A lot of people were expecting another hold. Here is what the hike changes in practice, with the numbers, and what you can do this week.

What happened on October 28

The Bank lifted its policy rate from 2.25% to 2.5%. It's the first hike since July 2023, and it ends a long run of holds. The reason comes down to one thing: inflation is back up. The consumer price index rose 3.1% year over year in September, driven mostly by energy, with gasoline up close to 28% from a year earlier. The Bank wants to stop that energy jump from spreading into the price of everything else. In its report it now expects inflation to stay above 3% through much of 2027.

Governor Tiff Macklem was cautious about what comes next. He said the council would take decisions one meeting at a time, that another hike is possible, but that it would move carefully. The next decision lands on December 9. In other words, nobody knows yet whether this is a one-off or the start of something more.

What it does to mortgages, right away

The most direct effect is on prime. National Bank raised it 25 basis points to 4.70%, effective October 29, and the other big banks are following the same move. If your mortgage is variable, your payment goes up at your next instalment, with nothing for you to do. The best five-year variable rate in the country has gone from 3.45% to 3.70%. To put a number on it, on a mortgage of roughly $600,000, Ratehub figures about $82 more a month, close to $1,000 a year.

Fixed rates don't move automatically with the Bank of Canada. They track the bond market instead. The best insured five-year fixed rates are around 4.34% right now, and they won't climb just because the Bank moved on Wednesday. Part of the recent rise in fixed rates was already there, because markets had been pricing in this hike. So if you compare today, variable still costs less than fixed, but the gap between them just narrowed a bit.

On the South Shore, the market was already rebalanced

Good news for buyers: this hike lands in a market that already gives you room. In September, 4,050 properties were for sale on the South Shore, 32% more than a year earlier. There were 746 sales, down 7% year over year but up 12% from August. Median prices are holding: $640,300 for a single-family home, barely 1% below last year, $405,500 for a condo, and $775,000 for a plex. Selling times are stretching out too, 37 days on average for a house, 57 days for a condo. You have time to look and to negotiate, and the rate hike doesn't change that.

What this means for you

• You're buying: if you already have a pre-approval with a rate hold taken before October 28, you keep your old rate, and it just got more valuable. If you don't, get pre-approved now. A rate hold locks your rate for 90 to 120 days, and if rates come back down, most lenders give you the lower one. Redo your budget at the new variable rate, not the one from two weeks ago. With 4,050 homes for sale, you can look without pressure. I get into this in my piece on buying this fall or waiting for spring.
• You're selling: your buyer's payment just went up a little, which trims their budget at the margin. With 32% more listings than a year earlier, it's your price that decides the sale, not the Bank's press release. Price realistically, and know that the buyer who is already pre-approved and rate-held is your strongest offer. If you're unsure about timing, we can go through your numbers with a free evaluation.
• You're investing: if the mortgage on your income property is variable, the hike eats into your cash flow starting next month. If you're renewing, redo your numbers at today's rate, not the one from 2021. A plex that worked at 1.9% doesn't necessarily work at 4.6%. Run your cap rate on the real cost of financing before you offer. I laid this out in my piece on renewing the mortgage on an income property.

Nobody can tell you what the Bank will do on December 9, and Macklem himself is going one meeting at a time. What you control is your file: a rate hold in hand, numbers run at the real rate, and a clear sense of what you can afford. If you'd like to go through that together before year-end, request a free evaluation or write to me. You can also read what I wrote before the decision, in my piece on getting your financing ready.