The first hike since 2023, and what it costs a Toronto mortgage
After seven straight holds, the Bank moved up. It raised its policy rate a quarter point to 2.5%, and the big banks' prime rate goes from 4.45% to 4.7% on October 29. The Bank's reason is inflation: with the conflict in the Middle East in its eighth month, energy prices have stayed high, CPI has run around 3% since April, and the Bank wants to stop that spreading into everything else. It said a further increase could be needed and that it will proceed carefully. The next decision is December 9.
On a Toronto-sized mortgage the arithmetic is simple. A quarter point adds roughly $14 a month for every $100,000 on a 25-year amortization, so about $96 a month on $700,000. If your variable payment moves with prime, you will see it on your next payments. If your payment is fixed and only the rate floats, the payment stays put but more of it goes to interest. A new variable approval is now stress-tested a quarter point higher too, which on a $150,000 household income takes roughly $16,000 off the maximum mortgage.
Fixed rates did not wait for today. They follow bond yields, and the five-year Government of Canada yield climbed from 2.67% in late February to 3.57% by October 27. The best insured five-year fixed we track for Ontario borrowers is 4.64%, against 3.95% for the best insured variable on the new prime. That gap has narrowed to 0.69 points, and it is the number to weigh when you choose, not a forecast of what the Bank does in December.
TRREB's September numbers, the latest out, had 5,040 sales across the GTA, down 9% from a year earlier, with new listings down 14.4% and an average price of $1,006,409, down 5.1%. TRREB said buyers were holding back over the economy, inflation and borrowing costs. A quarter point does not change what decides a Toronto file: which side of the $1.5 million insured cap you are on, how a lender reads your income, and what you negotiate on price.
What the Bank said
“The Bank of Canada today increased its target for the overnight rate by 25 basis points to 2.5%, with the Bank Rate at 2.75% and the deposit rate at 2.45%. Governing Council decided to increase the policy rate to reduce the risk that continuing high energy prices spread broadly to the prices of other goods and services.”
The rate path around this decision
For context, unemployment was running at about 6.5% and inflation at 3.1% around this decision.
Where this leaves you
Rate announcements make headlines; approvals turn on your own numbers. If you're buying, renewing or refinancing in Toronto, the useful next step is finding out what you actually qualify for — see current rates, run the math, or start an application. You can also follow the local market in our Toronto housing market reports.