October 28, 2026: Bank of Canada hikes rates to 2.5%
The wait is over. On Oct. 28, 2026 the Bank of Canada raised its overnight rate by 25 basis points to 2.5% — the first increase in about three years. The Bank Rate is now 2.75% and the deposit rate 2.45%. For Coquitlam and Greater Vancouver, that is not a headline for Ottawa only: variable-rate payments move first, qualification gets a little harder, and an already soft resale market takes another demand-side hit.
Why the Bank moved
Governing Council’s press release is clear: energy prices have stayed high for longer, and the risk is that those costs spread into the broader price of goods and services. CPI has been around 3% since April and is expected to rise to about 3.5% by the end of 2026. Strip out gasoline and September inflation was closer to 2.2%, with core measures still near 2% — but the Bank sets policy on where inflation is going, not only where it sits today.
Oil prices have been back above US$100, with gasoline up sharply on Middle East and Russia refining damage. High fuel costs hit consumers directly and raise production and transportation costs for businesses. Bank surveys suggest firms that have been absorbing those costs so far will pass more of them through over the next year. Near-term inflation expectations have risen; longer-term expectations remain anchored.
Governor Tiff Macklem put it this way after the announcement: with inflation looking substantially higher and the economy showing resilience, a rate increase is needed to reduce the risk that elevated energy prices “spill over and become generalized inflation.”
The new forecast
In the October Monetary Policy Report, the Bank revised both inflation and growth higher than in July:
CPI inflation expected to average about 3% through 2027 (a full percentage point above the July projection), then return near 2% by mid-2028
Canadian GDP growth about 1% in 2026 and 2% in 2027 and 2028
Housing expected to remain relatively weak
Consumption growth to moderate; growth to slow in Q4 2026 on new U.S. tariffs before picking up again in 2027
The Bank also noted that growth through mid-year was stronger than expected — Q2 GDP at 3.3%, third-quarter indicators around 2% — with solid consumer spending, a rebound in business investment, and exports helped by U.S. demand and energy. Unemployment has hovered near 6.5%, with some excess supply still in the economy. The forecast remains highly uncertain, especially around Canada–U.S. trade.
What it means on the ground in Coquitlam
Greater Vancouver was already a buyer-leaning market into fall 2026: sales below long-run averages, elevated listings relative to history, and year-over-year benchmark price declines. A 25-basis-point hike does not flip that overnight into a crash — but it does three practical things:
Variable-rate mortgages and HELOCs — payments tied to prime should rise as lenders reprice. Anyone on a variable product should check the new payment and stress-test room before taking on more debt.
New buyers — qualification under the mortgage stress test gets tighter at the margin. Some households who barely qualified last week will need a smaller purchase price, a larger down payment, or more income.
Sellers — demand that was already cautious may stay selective. Homes priced to today’s comps and presented well still move; wishful pricing gets longer days on market.
Developers feel this through higher carrying costs and slower absorption if buyers wait for the next meeting. Resale clients should not confuse a national rate decision with a local inventory clear-out: price off recent Tri-Cities sales, not off a press conference.
What to watch next
Macklem said there “could be a need to raise the policy rate further,” but Governing Council will “proceed carefully” and take decisions one meeting at a time. The next scheduled overnight-rate announcement is Dec. 9, 2026; the next full Monetary Policy Report is Jan. 27, 2027.
Between now and December, watch bank prime moves, fixed-rate mortgage pricing in the bond market, and whether local sales and new listings keep the Tri-Cities in buyer’s-market territory. If you are mid-transaction, talk to your lender or mortgage broker before assuming yesterday’s rate sheet still applies.
Are you curious about recent market activity or thinking of buying or selling in Coquitlam or Greater Vancouver? Contact us today for a comprehensive market analysis!
— Sam Tabrizi
Comments