What Happens to Your Mortgage If the Bank of Canada Raises Rates?

Where Things Stand

The BoC held its overnight rate at 2.25% on July 15 2026, its sixth consecutive hold. Markets are now pricing in rate increases for 2027. Scotiabank Economics forecasts 50 basis points of hikes starting in late 2026.

Desjardins has brought forward its first hike forecast to Q1 2027, with the rate reaching 2.75% by Q2 2027. RBC Economics projects a more gradual path, with the overnight rate reaching 3.25% by year-end 2027.

The drivers behind these forecasts are consistent across institutions: a stronger job market in 2027, persistent services inflation, elevated energy prices from the Strait of Hormuz conflict, and CUSMA trade uncertainty. Each of these puts upward pressure on inflation without necessarily requiring the Bank to act immediately.

Variable Rate Holders

Variable rate holders feel a BoC hike immediately. The prime rate moves within one to two days of the announcement. A single 25 basis point hike adds roughly $75 to $90 per month on a $500,000 variable mortgage at today’s rates.

The three predicted hikes add approximately $225 to $270 on top of the monthly mortgage payments. Variable rate holders should know their trigger rate, which is the point at which their payment no longer covers interest. This particularly applies if their mortgage was agreed to at the lower rates of the previous years of 2024 and 2025.

Fixed Rate Renewers

Fixed rate holders are fully protected until their term ends. The impact comes at renewal. If the three hikes come through, the best available five-year fixed rates could move from approximately 4.09% today toward a range of 4.75% to 5.25% by 2027.

New Buyers

New buyers face two effects from rate increases. The first is affordability. A one percentage point increase in rates trims purchasing power by roughly 10% for a given monthly payment.

The second is timing. Securing a pre-approval today means up to three months of rate hold protection. If the BoC hikes before a deal closes, locking in a rate now could save thousands. Anyone planning to buy in the next six months should get a rate hold in place before the October 28 decision.

The Bank of Canada’s July 2026 Monetary Policy Report projected GDP growth of 0.7% for 2026 rising to 1.8% in 2027 and 2028. The governing council noted that upside risks to inflation have increased while trade uncertainty makes the growth outlook more uncertain, leaving the direction of the next rate move dependent on incoming data.

When to Talk to a Mortgage Broker

A broker can show you the real payment impact of each scenario against your own balance and amortization. Whether you are monitoring a trigger rate, approaching a 2027 renewal, or locking in a pre-approval, the conversation is worth having before the October 28 decision arrives.