Bank of Canada interest rate forecast: What to expect on October 28

In its September 2 announcement, the Bank has held its key rate at 2.25%. It has been so since it was cut from 2.50% in October 2025.

With inflation back above 3% and energy prices elevated by the war in Iran, experts are predicting roughly 80% odds of a 0.25% hike. Several economists have changed their calls.

However, Clay Jarvis, a mortgage expert at Ratehub.ca, sees it differently. 

Clay Jarvis is the former editor of Mortgage Broker News. He has spent more than a decade covering personal finance, mortgages and the Canadian housing market, and his commentary has been quoted by The Globe and Mail, the Financial Post, CBC and Global News.

Bank of Canada interest rate forecast for October 28

“This is shaping up to be the most dramatic Bank of Canada decision we’ve had in ages,” Jarvis told MoneySense.

“Analysts are split on whether the Bank should raise the overnight rate, but this week’s spike in bond yields was the result of investors betting on a rate hike.”

Jarvis believes the case for a hike is weaker than markets suggest: “It’s hard to see a clear path to a rate increase at this point,” he said.

Inflation climbed to 3.1% in September from 3.0% in August, according to Statistics Canada figures, but gas was up 27.8% from a year ago, and did most of the work

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Excluding gas price increases, inflation slowed to 2.2%

“Inflation may be a growing concern, but it’s not yet the kind of widespread problem that demands the Bank’s attention,” Jarvis told us. “Rising unemployment, meagre economic growth and the trade war with the U.S. feel like more pressing problems, which makes a rate hold next week seem more likely.”

The labour market is struggling. Canada lost 68,000 jobs in September and the unemployment rate rose to 6.5%.

That may not seem like enough reason for a hold to everyone. Desjardins now expects the Bank to hike at the October announcement, while RBC economists still expect the Bank to hold through the rest of 2026. 

Along with a rate decision, the Bank of Canada will also publish its Monetary Policy Report alongside the October 28 decision, with updated economic projections.

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What it means for fixed mortgage rates

“Bond yields, which lenders use to price their fixed mortgage rates, are within a hair of their Iran war-era peaks. So long as yields remain near their current levels, home buyers shouldn’t expect fixed rates to decrease by a significant degree,” Jarvis noted.

“For fixed rates to sink back under 4%, three- and five-year yields would need to shed about 60 basis points each. That might require a ceasefire, or at least some concrete steps towards ending the U.S.-Iran conflict.”

While 4% fixed rates are nowhere to be found, today’s lowest rates still look pretty good by historical standards. Three-year and five-year fixed rates are as low as 4.34%, while some lenders are offering two-year fixed rates at 4.39%.

“When rates are this volatile and unpredictable, home buyers and homeowners facing a renewal should strongly consider arranging a rate hold through a mortgage broker,” Jarvis said. “Locking in a rate cushions you against further rate increases, which can otherwise lead to some nasty surprises.”

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What it means for variable mortgage rates

Jarvis said that if the Bank of Canada holds the overnight rate, variable mortgage rates will continue hovering near their current levels until at least December 9, when the Bank is scheduled to make its next rate decision.

The lowest variable mortgage rate in Canada is currently 3.43%, a significant discount compared to today’s fixed rates.

“If the Bank announces a rate increase, it’ll quickly trigger higher variable mortgage rates. Assuming a 25-basis point hike from the Bank, variable rates would rise to 3.7%. That’s not a game-changing increase, but it could still prove to be a drag on the fall housing market.”

To put a 0.25% increase in dollars: According to Ratehub.ca’s mortgage payment calculator, a homeowner who put a 10% down payment on a $666,538 home with a 5-year variable rate of 3.45% amortized over 25 years (total mortgage amount of: $618,480) has a monthly mortgage payment of $3,072.

What it means for the housing market

“The fall housing market is already shaping up to be a bit of a dud,” Jarvis shared. “A rate hold by the Bank of Canada would preserve an underwhelming status quo, where high consumer costs and economic uncertainty are leeching away home buyer confidence. A rate hike could chill housing demand even further.”

The numbers also back up that observation. Home sales fell 2.3% in September from August and were down 7.7% from a year earlier, according to the Canadian Real Estate Association (CREA), which has now cut its 2026 sales forecast three times. The national average price was $666,538, down 1.6% from a year ago.

2026 Bank of Canada announcement dates

Six rate announcements have already passed this year, and the Bank releases its decisions at 9:45 a.m. ET.

The two remaining dates are October 28, which includes a Monetary Policy Report, and December 9, according to the Bank of Canada’s 2026 schedule.

*Canadian Real Estate Association September 2026 average home price.

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About MoneySense Editors

MoneySense editors and journalists work closely with leading personal finance experts in Canada. Since 1999, our award-winning magazine has helped Canadians navigate money matters.

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