Bank of Canada Raises Interest Rate - October 2026

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The Bank of Canada announced on October 28, 2026, that it is increasing its overnight policy rate by 0.25 percentage points, bringing it from 2.25% to 2.50%. The Bank Rate now sits at 2.75%, while the deposit rate has increased to 2.45%. This marks the first interest rate increase since July 2023, following a full year of unchanged rates.

For anyone buying or selling real estate in Abbotsford, Chilliwack, Mission or elsewhere in the Fraser Valley, this announcement represents a shift in Canada's borrowing environment.

Although a quarter-point increase may seem relatively small, it can affect mortgage payments, purchasing power and buyer confidence. Understanding what has changed, and why, can help buyers and sellers make informed decisions in today's housing market.

The primary concern behind today's announcement is inflation.

Higher global energy prices, particularly oil and gasoline, have increased costs for Canadian consumers and businesses. These increases affect more than just what we pay at the gas pump. Transportation, manufacturing, construction and everyday goods can all become more expensive. Canada's inflation rate has remained around 3% since April, above the Bank of Canada's 2% target. 

The Bank is concerned that businesses may increasingly pass higher operating costs along to consumers, keeping inflation elevated for longer than previously anticipated.

By raising interest rates, the Bank hopes to prevent these price pressures from spreading throughout the broader economy.

The challenge is balancing inflation control with economic growth, particularly when Canadian households are already managing elevated living costs.

For Fraser Valley home buyers, today's announcement is an important reminder that borrowing costs can change. Higher interest rates can reduce mortgage affordability and influence how much buyers qualify to borrow.

However, interest rates are only one factor affecting the real estate market.

Housing inventory, local demand, property prices and competition also influence buying opportunities.

With more housing options available across many Fraser Valley communities compared with the highly competitive markets of previous years, buyers may still find opportunities to negotiate favourable terms.

For buyers considering a purchase in East Abbotsford, Sardis, Promontory, Garrison Crossing or Mission, understanding both financing and neighbourhood-specific market conditions is particularly important.

The goal isn't necessarily to time the market perfectly. It's to purchase a property that makes sense for your financial situation and long-term plans.

Higher interest rates can influence buyer confidence and purchasing power, which makes proper pricing and marketing particularly important. Buyers continue to look for homes that offer good value, desirable locations and features that meet their needs.

For sellers in Abbotsford, Chilliwack and Mission, understanding competing listings and recent comparable sales remains essential. Professional photography, thoughtful presentation, strategic marketing and realistic pricing can all help a property stand out.

While today's interest rate increase may encourage some buyers to reconsider their budgets, it doesn't mean that real estate activity will stop. Homes that are positioned appropriately within their local market can continue to attract serious buyers.

The key is understanding what buyers are looking for and how your property compares with the competition.

It's important to understand that the Bank of Canada's overnight policy rate is not the same as the mortgage rate offered by your lender.

However, changes to the policy rate can influence borrowing costs.

Variable-Rate Mortgages

Variable-rate mortgages are generally tied to a lender's prime lending rate.

When the Bank of Canada increases its policy rate, lenders will often increase their prime rates as well.

Depending on the mortgage structure, borrowers may experience higher monthly payments or see more of their existing payment allocated toward interest rather than principal.

Fixed-Rate Mortgages

Homeowners with an existing fixed-rate mortgage will generally not see their interest rate change during their current term. However, borrowers approaching renewal or applying for a new mortgage may encounter different rates.

Fixed mortgage rates are influenced more heavily by government bond yields, financial-market expectations and lender pricing.

This means fixed mortgage rates don't necessarily move in the same direction or by the same amount as the Bank of Canada's overnight rate.

Let's look at a simple example using a $600,000 mortgage with a 25-year amortization.

At a mortgage interest rate of 4.00%, the monthly principal and interest payment would be approximately $3,168. If that mortgage rate increased to 4.25%, the monthly payment would increase to approximately $3,250. That's an additional $82 per month, or approximately $984 annually.

While this may not seem like a substantial increase, higher borrowing costs can affect household budgets and mortgage qualification.

Actual impacts depend on your lender, mortgage type, remaining amortization and whether the rate increase is passed along to borrowers.

Despite concerns surrounding inflation, Canada's economy has demonstrated some improvement. Gross domestic product increased by 3.3% in the second quarter of 2026, with more recent indicators suggesting approximately 2% growth in the third quarter.

Consumer spending has remained relatively resilient, while business investment and exports have shown signs of improvement. However, economic uncertainty remains.

Ongoing trade tensions with the United States, higher energy prices and global geopolitical developments continue to influence Canada's economic outlook. The Bank of Canada currently projects economic growth of approximately 1% in 2026, followed by 2% growth in both 2027 and 2028.

Inflation is expected to remain around 3% through much of 2027 before gradually returning toward the Bank's 2% target by the middle of 2028. These forecasts help explain why the Bank has decided to take a more cautious approach to inflation.

Additional interest rate increases remain possible. The Bank of Canada has indicated that further adjustments may be necessary if elevated energy prices and other cost pressures continue contributing to inflation. However, future decisions will depend on economic conditions.

The Bank will continue monitoring inflation, employment, consumer spending, economic growth and developments affecting international trade.

The next scheduled Bank of Canada interest rate announcement is December 9, 2026.

For homeowners and prospective buyers, staying informed about these announcements can help with mortgage planning and future real estate decisions.

Interest rates influence housing affordability, but they don't tell the entire story.

Real estate conditions can vary significantly between communities,

neighbourhoods and property types. A detached home in East Abbotsford may experience different market conditions than a townhouse in Sardis or an acreage property in Mission.

Inventory levels, buyer demand, property condition and local competition all influence how homes are priced and sold.

That's why it's important to look beyond national headlines and understand what's happening in your specific market.

Whether you're purchasing your first home, upgrading, downsizing, renewing a mortgage or considering selling, having accurate information can make a meaningful difference.

Thinking about buying or selling in Abbotsford, Chilliwack or Mission? Call Curt.

I can help you understand what today's real estate market means for your plans and provide the local information you need to move forward with confidence.

Curtis Paulson PREC*
REALTOR® | Century 21 Creekside Realty Ltd.