In this blog:
What Does the Bank of Canada do?
Eight times a year, the Bank of Canada (BOC) announces its benchmark lending rate based on an assessment of the Canadian economy. This rate directly impacts variable interest rate products, such as mortgages, loans, and lines of credit, as banks and lenders adjust their prime rates accordingly. Understanding these changes can help you make informed financial decisions. For more information, take a look at our blog post summarizing four of the most frequently asked questions regarding the BOC.
Below, we break down the latest announcement and what it means for you.
Were there any Changes to the Interest Rate?
The Bank of Canada increased its overnight lending rate today, up from 2.25 percent to 2.50 percent. This morning’s announcement marked the bank’s first increase since July of 2023.
What Information did the Bank Share about the Economy?
Canadian Economy
- Growth in Canada’s fourth quarter is expected to slow, largely due to new US tariffs.
- The Bank of Canada predicts growth to pick back up in 2027, bolstered by business investment, exports, and fiscal measures.
- Uncertainty remains over the Canada-US trade relationship, however growth projections have increased slightly from July’s Monetary Policy Report.
- Inflation is expected to rise from 3 percent to 3.5 percent by the end of 2026.
- The ongoing conflict in the Middle East has contributed to persistent inflationary pressures, with inflation projected to remain elevated at 3% in 2027 before gradually declining to the 2% target by mid-2028.
Global Economy
- The global economy has remained resilient against high energy prices. However, most countries have seen increased inflation over the past several months.
- Canada’s central bank has revised their projection for global GDP growth in 2026 to 3.1 percent. Expectations for growth in 2027 and 2028 remain unchanged at 3.2 percent.
How does this Impact Me?
- For Canadians with a variable-rate mortgage or home equity line of credit, your payments will increase along with the prime rate offered by your lender.
- If you currently have a fixed-rate mortgage, today’s announcement won’t change your existing mortgage rate or payments during your term. However, if your mortgage is coming up for renewal, it’s a good time to review your options and assess how the current rate environment may impact your mortgage renewal.
- Looking ahead to 2027, increased fuel costs are expected to put continued upwards pressure on production and transportation. The central bank predicts that these costs will be passed on to the consumer throughout next year.
If you’re a potential homebuyer with questions about how today’s Bank of Canada announcement could affect your mortgage application, we’re here to help you understand your options.
Will there be any Interest Rate Changes in the Near Future?
The final rate announcement of 2026 is scheduled on December 9, 2026. The Bank of Canada has indicated that further interest rate increases may be necessary to address persistent inflationary pressures. However, given ongoing economic uncertainty, future decisions will be approached cautiously.
How Can I Learn More?
The Bank of Canada’s full press release is available directly on their website. If you’re wondering how today’s announcement will impact you specifically, please feel free to contact our team.
