What if the rate rises in October instead of falling?

For a year now, almost everyone has been waiting for the next rate cut before making a move. The scenario taking shape this fall is the opposite: the Bank of Canada could raise its rate in October. Here is what that changes for you, without the drama.

Seven holds, and a shifting wind

On September 2, the Bank of Canada left its policy rate at 2.25%. That was a seventh hold in a row. Nothing new on the surface. What changed is the tone behind the decision.

Headline inflation climbed back to 3.0%, right at the top of the Bank's 1 to 3% target band. A good part of that push comes from energy prices. The core measures the Bank watches most closely still sit near 2%, but the room to cut rates has narrowed. Most economists expect a hold through year end. Two of the country's six largest banks, National Bank and Scotiabank, see a hike instead, to 2.50% on October 28 and 2.75% by December.

Why it matters, even with nothing decided

A forecast is not a fact. No one knows what the Bank will do on October 28, and there is still inflation and jobs data to come before then. But the fact that a hike is even on the table changes how you plan. For a year, the question was how long to wait for a cut. Now the real question is what you do if the next move is up.

A variable rate tracks the policy rate almost immediately. If the Bank raises 0.25%, a variable loan costs more the following month. A fixed rate depends mostly on the bond market and moves ahead of the Bank. Right now, in Quebec, the lowest five-year fixed sits around 4.39% and the variable near 3.45%. The gap between the two has narrowed, which makes the choice less obvious than it was six months ago.

The South Shore market gives you time

Good news on the real estate side: the pressure has eased. In August, the South Shore had 3,703 homes for sale, up 28% from a year earlier, with 664 sales closed, down 15%. More choice, less of a race. You have time to shop your financing and compare before you submit an offer.

It also means a rate hike would not mechanically translate into falling prices. Prices are holding in most segments despite the slower pace of sales. A slightly higher rate mostly cuts your borrowing power, not necessarily the asking price of the home you want. Your budget is what moves first.

What it means for you

• If you're buying: get pre-approved now. A pre-approval locks a rate for 90 to 120 days. If the rate goes up on October 28, you keep yours; if it drops, you take the lower of the two. There is nothing to lose by securing a rate early this fall, and a lot to gain if the hike scenario plays out.
• If you're selling: don't count on a rate cut to bring buyers back. It is no longer the main assumption. The lever that matters is still the starting price, set right, and a home that's ready to show. In a market with 28% more listings, it's the well-prepared, well-priced property that stands out, not the one waiting on a nudge from the Bank.
• If you're renewing or investing: if your mortgage renews in the next 6 to 12 months, talk to your lender now about an early agreement. For an income property, rerun your numbers with a stable or slightly higher rate, not the cut we were hoping for in the spring. A project that works at 2.25% or 2.50% is a solid project.

These benchmarks apply to the whole South Shore, not to your specific file. The right choice between fixed and variable, the right time to lock a rate and the right price all depend on your own numbers. Before you decide, let's talk. Request a free evaluation or write to me, and we'll build a plan that holds whether the rate rises or not. You can also revisit my piece on whether to wait for a rate cut before buying.