Rate Hike Talk Heats Up Ahead of the Bank of Canada's October 28 Decision

After a long stretch of steady rates, the conversation around the Bank of Canada has shifted. For much of the past year, the question was when the next cut might come. Now a growing number of economists are asking whether the Bank's next move could be a hike.

With the next rate announcement three weeks away, here is what has changed, what the experts are saying, and what it could mean for your mortgage.

What Happened

On September 2, the Bank of Canada held its policy rate at 2.25% for the seventh straight decision, noting that recent developments had "increased the upside risk to inflation." Governor Tiff Macklem followed up with a speech in Halifax on September 21, saying the Bank is "prepared to adjust monetary policy as needed." At the same time, he stressed that the Bank does not want to "raise our policy rate and restrain growth if inflationary pressures are contained."

Since then, several forecasters, including UBS, Manulife, Oxford Economics and Scotiabank, now expect the Bank to raise its rate in October, according to Canadian Mortgage Professional.

The Numbers Behind the Debate

Inflation: Canada's Consumer Price Index rose 3% year over year in August, about one percentage point above the Bank's 2% target. Macklem said inflation "has remained around 3% in recent months, largely because of these higher fuel prices," tied to the oil shock from the conflict involving Iran. He noted that every 10% rise in oil prices adds roughly 0.2% to CPI inflation, and that if oil stays near $100 a barrel, inflation is expected to "edge up in the coming months."

The case against a hike: Not everyone is convinced. CIBC economist Helen Lao points out that about 0.8 points of the overshoot comes from gasoline and 0.3 points from airfares and travel, and only 38% of Canada's 55 major CPI components are rising faster than 3%. In her view, "the case for a parallel Canadian hike at this moment gets much weaker," and Canada could instead follow the U.S. in 2027.

Growth: Macklem also warned that if new U.S. tariffs remain in place, fourth-quarter growth "could be roughly halved" to below 1%.

Why It Matters for Mortgage Rates

Variable-rate mortgages and lines of credit follow the Bank of Canada's policy rate through lenders' prime rates. If the Bank hikes, variable borrowers would feel it quickly.

Fixed rates follow Government of Canada bond yields, which have already been pushed higher by expectations of tighter policy. They eased slightly last week: according to Bank of Canada data, the 5-year benchmark yield was 3.63% on October 5, down from 3.69% on September 29, while the 2-year slipped from 3.37% to 3.26%. CMHC deputy chief economist Aled ab Iorwerth told CMP that "there's a lot of demand for capital... and this is pushing up long-term interest rates."

The Housing Market Is Feeling It

Uncertainty is keeping many buyers on the sidelines. In the Greater Toronto Area, TRREB reported 5,040 sales in September, down 9% from a year earlier, while the average selling price fell 5.1% to $1,006,409. It was the third straight month of annual declines. "Substantial pent-up demand exists in the GTA, but homebuyers need confidence in employment stability and inflation control," said TRREB's Jason Mercer.

Nationally, TD Economics has cut its 2026 home sales forecast to a 5.3% decline, from 1.8% previously. And in an October 1 speech, Bank of Canada Senior Deputy Governor Carolyn Rogers said affordability ultimately requires "more supply, better planning and infrastructure," not monetary policy alone.

What This Means for Homeowners and Buyers

Variable-rate borrowers: A hike is not a done deal, but it is worth reviewing your budget now and understanding how a change in prime would affect your payments.

Renewing in the next year: Fixed rates have been volatile. Starting the renewal conversation early gives you time to compare options rather than simply signing your lender's offer.

Buyers: Softer prices and more choice in markets like the GTA can work in your favour. A pre-approval with a rate hold can help protect you if rates move before you buy.

Fixed-rate borrowers mid-term: Your rate is locked until renewal, so nothing changes for now.

Looking Ahead

September inflation data is due October 19, with UBS projecting the annual rate could reach 3.3%. The Bank of Canada's next rate announcement is Wednesday, October 28, followed by the final decision of the year on December 9.

Bottom Line

Rates have been steady for months, but the outlook has become less certain. Whether the Bank holds or hikes on October 28, having a plan matters more than predicting the outcome. If you have a renewal coming up, are thinking about buying, or simply want to understand your options, the Admore team is here to help. Reach out anytime for a no-pressure conversation.

Sources:

Bank of Canada – "Navigating uncertainty and adapting to change," Governor Tiff Macklem, September 21, 2026

Bank of Canada – "Canada's housing affordability dilemma," Senior Deputy Governor Carolyn Rogers, October 1, 2026

Bank of Canada – Selected benchmark Government of Canada bond yields, October 5, 2026

Canadian Mortgage Professional – "Bank of Canada rate hike case weaker than Fed's, CIBC argues," October 6, 2026

Canadian Mortgage Professional – "Don't expect the current mortgage rate volatility to end anytime soon," October 5, 2026

Canadian Mortgage Professional – "Toronto home sales lose momentum as buyers hold their fire," October 6, 2026