The Bank of Canada has increased its key interest rate by 0.25 percentage points to 2.50%, marking its first rate hike since 2023.
The decision comes as inflation climbed to 3.2% in September, driven in part by higher oil and energy costs. By increasing interest rates, the Bank aims to moderate spending and borrowing, helping ease demand and prevent rising costs from putting further pressure on household budgets.
By the Numbers
- 2.50% — Bank of Canada key interest rate, up 0.25 percentage points
- 4.70% — Prime lending rate, up from 4.45%
- 3.1% — Annual inflation rate in September
What Does This Mean for the Real Estate Market?
For homeowners with variable-rate mortgages: Your borrowing costs may increase following the rate hike. As a general estimate, a 0.25 percentage point increase could add approximately $13 to $14 per month for every $100,000 of mortgage balance, depending on your mortgage terms.
For homeowners with fixed-rate mortgages: If you are within your current fixed-rate term, your interest rate will generally remain unchanged until renewal.
For those renewing within the next 12 months: This may be a good time to review your mortgage options. Some lenders offer rate holds of up to 120 days before renewal, which may help protect against potential increases during that period. Ask your lender or mortgage professional about the terms that apply to you.
For prospective buyers: Higher interest rates can affect mortgage affordability and the amount you may qualify to borrow. An updated mortgage pre-approval can help you understand your budget and, where available, secure a rate hold while you search for your next home.
Our Takeaway
A rate increase may influence borrowing costs and purchasing power, but there is no need to make decisions in a hurry. Understanding your options and planning ahead can help you make a more informed choice.
At Keystone Realty Advisors, we know that economic changes can raise questions about your next real estate move. Whether you are thinking about buying, selling, or reviewing your plans, our team is here to help you navigate the market with confidence.
