The Bank of Canada Raised Rates. Here's What It Means If You're Buying in London or St. Thomas

On October 28 the Bank of Canada raised its policy rate by a quarter point, to 2.50%. It's the Bank's first increase in more than three years. The big banks moved their prime rate up the next day, from 4.45% to 4.70%. If you're buying your first home in London or St. Thomas, or your mortgage is up for renewal soon, here's what that means for you.

Why did the Bank of Canada raise rates?

Energy. High oil and energy prices have pushed inflation up, and the Bank said it acted to reduce the risk that those costs spread into the prices of other goods and services. It now expects inflation to stay around 3% through much of 2027, above its 2% target.

What happens to a variable-rate mortgage?

It depends on which kind of variable mortgage you have, and on the terms of your agreement.

• Adjustable payment: your payment rises with prime. When the new payment starts depends on your contract. In the example above it's about $54 a month more.
• Fixed payment: your payment stays the same, but more of it goes to interest and less to paying down your balance. If rates keep rising, you can reach the point where your payment only covers the interest. Your lender may then require higher payments or another adjustment under your agreement.

If you're not sure which one you have, check your mortgage agreement or annual statement, or ask your lender for your trigger rate.

Should I choose fixed or variable right now?

There's no right answer for everyone. On November 4, the lowest advertised high-ratio (insured) 5-year rates on Ratehub were 3.68% variable and 4.44% fixed, a gap of 0.76 percentage points. Advertised rates depend on your down payment, mortgage insurance, the property and other conditions, so the rates you're offered may be different.

A variable rate can move, and the Bank has just shown it's willing to raise rates. A fixed rate gives you a known payment for the whole term. Pick based on how much payment change you can comfortably live with, not just the lowest number on the rate sheet. If an extra $100 or $200 a month would strain your budget, the certainty of fixed may be worth paying for.

What else is going on in the economy?

Growth picked up earlier this year, but the Bank expects it to slow at the end of 2026, partly because of new US tariffs. Unemployment has been sitting around 6.5% for several months, and the Bank expects the housing market to stay relatively weak.

For buyers, that mix means two things. A softer market can mean more choice and more room to negotiate. And it's a good time to keep a cushion: don't stretch to the very top of your approval, and keep some savings set aside after closing.

Is there HST relief on new homes?

Yes, and it can be worth a lot. For eligible newly built or substantially renovated homes bought from a builder between April 1, 2026 and March 31, 2027, Ontario and Ottawa are providing relief of up to the full 13% HST, to a maximum of $130,000, on homes valued up to $1 million. The $130,000 maximum also applies to eligible homes valued between $1 million and $1.5 million, and partial relief continues up to $1.85 million.

The relief comes in two parts. Up to $80,000, the provincial portion of the HST, is Ontario's enhanced new housing rebate, administered by the Canada Revenue Agency. Applications are open now, and builders often credit it on closing. Up to $50,000 more, the federal portion, comes as the Ontario New Home Affordability Payment. You don't apply for it separately; it follows your CRA rebate application, and Ontario expects payments to begin in early 2027.

One step people miss: the CRA rebate form has an ONHAP consent section. Complete it, or make sure your builder does if they file for you, so the CRA can share your contact and banking details with Ontario. If you don't consent, you'll have to send that information to Ontario yourself to get the payment.

If you're a first-time buyer, you can't simply add the federal First-Time Home Buyers' GST/HST rebate (up to $50,000) on top of the $130,000. Ontario reduces its affordability payment by any federal HST rebate you're entitled to claim.

None of this applies to resale homes, and the eligibility rules and deadlines are strict. Confirm the current rules with the CRA and the Ontario government, and have your lawyer review the builder's agreement before you sign.

This article is general information, not mortgage, tax or financial advice. For advice on your own situation, speak with a licensed mortgage agent or broker and a real estate lawyer.

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Frequently asked questions

Does the rate hike change my fixed-rate mortgage?

No. Your rate and payment stay the same until your term ends. When you renew, your rate will depend on the rates available at that time; this one increase doesn't set it. If your renewal is within the next year, start comparing options early.

When is the next Bank of Canada rate decision?

December 9, 2026. Nobody knows for sure what the Bank will do, so plan your budget so you're okay whether rates go up, hold or come down.

Do the new-home HST rebates apply to resale homes?

No. They're for eligible newly built or substantially renovated homes. A resale purchase may still qualify for Ontario's first-time buyer land transfer tax refund.