The Bank of Canada raised its policy interest rate yesterday, October 28, by a quarter point, from 2.25% to 2.5%. It's the Bank's first increase since July 2023, and Governor Tiff Macklem said there "could be a need" to raise it again.
Last week I wrote about how traders had put an 87% chance on a Bank of Canada hike. That bet paid off. Here's what the Bank actually said, and what I'd do with it if you're buying, selling or renting in Greater Vancouver.
Why the Bank raised rates
In short, it's about energy prices. In its statement, the Bank says the conflict in the Middle East is in its eighth month "and there is no clear path to resolution." Gas, diesel and heating oil cost a lot more than they did in July, and the Bank expects them to stay high.
CPI inflation has been around 3% since April, and the Bank expects it to rise to about 3½% by the end of the year. It now sees inflation averaging 3% in 2027 and getting back to the 2% target around the middle of 2028.
The Bank was open about the case for holding, too. Inflation excluding gasoline was 2.2% in September, and core inflation measures are still close to 2%. In the end, it decided to act now to "reduce the risk that continuing high energy prices spread broadly" into other prices.
The economy is also holding up better than the Bank expected. It now projects 1% growth in 2026 and about 2% in 2027 and 2028, with unemployment around 6½%. The statement also says the Bank expects "housing to remain relatively weak."
What it changes, and what it doesn't
The Bank's rate mainly drives variable-rate mortgages and lines of credit, so if you have one of those, expect your lender to tell you about a higher rate or payment. Fixed rates follow the bond market rather than the Bank, and the Bank notes that government bond yields in advanced economies are higher than they were in July.
What I'd keep in mind is the wording after the decision. Macklem said the Bank will take decisions "one meeting at a time" and "proceed carefully." That isn't a promise of more hikes, and it isn't a promise that this is the last one. I wouldn't plan a purchase around guessing the next move.
What this means for you
If you're buying: get your pre-approval redone at today's rates rather than relying on one from the summer. Ask your lender to show you the payment at the current rate and a quarter point higher, so a future change doesn't catch you off guard. If you want to play with numbers, my mortgage calculator is free to use. And if you're looking for a realtor in Coquitlam, Port Moody or Port Coquitlam, my guide for home buyers explains how I work with buyers in the Tri-Cities, BC.
If you're selling: some buyers who were already stretching will now qualify for a bit less. Price from what's actually selling near you, expect more financing conditions, and make sure a buyer's subjects are realistic before you accept.
If you're renting, or you're a newcomer: a rate decision doesn't change the rent on a listing this week. If you're planning a move to Greater Vancouver, the bigger questions are still your budget, your commute and your timing. My guide to relocating to Greater Vancouver walks through neighbourhoods from Vancouver out to the Tri-Cities, BC.
If you'd like help finding a place before you arrive, my relocation rental service for tenants covers all of Greater Vancouver. The fee is $1,500 plus GST, paid by the tenant: $750, non-refundable, at the start, and $750 once a rental is secured. Reach out 4 to 6 weeks before your move.