Prime Rate Increased – Analysis And Recommendations

What happened yesterday

The Bank of Canada raised its rate yesterday by a quarter point, from 2.25% to 2.50%. It’s the first increase since July 2023.

The short version of why: increased energy prices. Oil prices have stayed high for most of the year, inflation has been running around 3% since April, and the Bank now expects it to reach about 3.5% by the end of the year. Take gasoline out and inflation was 2.2% in September. What the Bank is worried about is high fuel costs spreading into the price of everything else.

This isn’t 2022 again

We don’t expect rates to increase as much or as fast as they did in 2022. We’re in a totally different economic scenario.

In 2022 the economy was running hot. Unemployment hit a record low, inflation peaked above 8%, and house prices had just set records. The Bank raised rates seven times that year, including a full percentage point in a single move.

Today it’s the opposite. The economy is still slow and losing jobs. Canada shed jobs in both August and September, and unemployment is sitting at 6.5%. GDP isn’t taking off either. Growth picked up over the summer, but the Bank expects only about 1% for the year, and a slowdown this quarter as new U.S. tariffs bite. And housing is still slow, which the Bank expects to continue. This hike is about energy prices, not an economy that’s overheating.

That’s why the Bank said it may need to go higher, but given the uncertainty it will “proceed carefully.” That is not the language of a central bank getting ready to sprint. In 2022 it was moving half a point, three-quarters of a point, even a full point at a time. Yesterday it moved a quarter point, and even after the hike its rate sits at the low end of what it considers neutral: not pushing the economy forward, not holding it back. The next decision is December 9.

If you’re in a fixed rate

Nothing changes. Your rate and your payment are locked in until the end of your term. Yesterday’s announcement doesn’t touch you.

Where it matters is renewal. Fixed rates don’t follow the Bank of Canada. They follow the bond market, and the bond market moved well before the Bank did. Investors saw this hike coming and priced it in through September and October, which is why fixed rates have been creeping up all fall. It’s also why fixed rates didn’t jump yesterday. The move had mostly already happened.

Renewing in the next four months?

Talk to me before your lender’s renewal letter shows up. Most lenders will let you lock in a rate around 120 days before your maturity date, and if rates drop before then, you can usually still take the lower one. The rate printed on a renewal letter is often not the best one you can get.

Thinking about breaking your fixed?

Not because of yesterday’s hike. Fixed-rate penalties at the big banks can be large, and a quarter point at the Bank of Canada doesn’t come close to justifying one.

If you’re in a variable rate

Your rate goes up a quarter point, effective today, October 29, at the big banks, and most other lenders are following. Your discount off prime doesn’t change. If you were at prime minus 0.90%, you’re still at prime minus 0.90%. Prime is what moved.

What you’ll actually notice depends on your mortgage:

Your lender will send you a notice. You don’t have to do anything.

Should you lock in?

For most of you, I wouldn’t, and I’ll explain why below. But if that extra payment genuinely hurts, or you’re losing sleep over it, call me. Most variable mortgages can be converted to a fixed rate without a penalty, but the terms vary by lender, so I’ll check yours with you before you do anything.

Why I still lean variable

In my last newsletter I wrote that variable rates sat three to four hikes below fixed. You’d think yesterday’s hike used up one of those. It didn’t, because fixed rates have climbed too. On today’s numbers, my five-year variable sits about a full point below my five-year fixed. That’s roughly four quarter-point hikes of room.

I still think variable is the better route for most of my clients. Here’s why.

That said, the risk is real. Bond traders are betting on more hikes, as many as three more by the end of next year. On today’s numbers, three more would bring the five-year variable to within about a third of a point of the five-year fixed. Variable would still be lower, but not by much, and it would take more hikes than that, held for years, for fixed to come out ahead. Some bank economists think one more hike is the top. Nobody knows, including me.

Variable isn’t for you if…

A few hundred dollars more a month would squeeze your budget. Three more hikes on a $500,000 mortgage whose payment moves with prime is about $210 a month.

You want your payment nailed to the floor. If you’d rather not think about it for five years, certainty is worth paying for, and fixed buys it.

Rate headlines keep you up at night. Your sleep is worth more than the difference.

That’s my view, not a rule for everyone. Your income, your plans and your tolerance for risk should decide this, not my opinion. If you want to work out which one actually fits you, that’s my favourite conversation to have.

Current rates

Here’s where my pricing sits as of October 29, 2026.

Existing deals cannot be repriced.

Your rate depends heavily on your transaction and qualifications.

Rates as of October 29, 2026, and subject to change without notice. O.A.C. High ratio (insured) rates require eligibility for mortgage default insurance; conventional (uninsured) rates apply to mortgages without default insurance. Switches and transfers are subject to lender eligibility. Existing deals cannot be repriced. Your rate depends on your transaction and qualifications. For information only; not an offer of credit.

Want a real quote on your file? Start an application or book a call below.

DAVID STEINBERG  AMP, BComm

Mortgage Strategist | Olympic Mortgage Corporation

250.858.7160  |  olympicmortgages.ca  |  Start an application

Rates and figures as of October 29, 2026. Payment examples are approximate, assume a 25- to 30-year amortization, and depend on your lender, balance and mortgage type. Conversion, prepayment and penalty terms vary by lender. This newsletter is general information, not advice for your specific situation, and not an offer of credit. All mortgages are subject to approval (O.A.C.). Olympic Mortgage Corporation, BCFSA #145716.