A 1-point (100-basis-point) increase in the Bank of Canada policy rate would raise variable mortgage rates by the same amount, adding roughly $50 to $60 per month for every $100,000 you owe. On a $400,000 mortgage, that translates to approximately $200 to $240 more per month, or $2,400 to $2,880 per year. Whether you see this as a higher payment or a longer amortization depends on your mortgage type.

How the Bank of Canada Rate Affects Variable Mortgages

The Bank of Canada sets the policy interest rate (also called the overnight rate or target rate), which directly influences the prime rate that Canadian lenders charge. According to the Bank of Canada, changes to the policy rate typically pass through to prime within days, and variable-rate mortgages are priced as prime plus or minus a spread (for example, prime minus 0.50 per cent).

If the policy rate rises by 100 basis points (1.00 percentage point), prime rises by the same amount, and your variable rate follows. A variable mortgage at prime minus 0.50 per cent would jump from, say, 5.45 per cent to 6.45 per cent.

Two Types of Variable Mortgages in Canada

Canadian variable-rate mortgages come in two forms, and a rate hike affects each differently:

Adjustable-rate mortgage (ARM): Your payment adjusts immediately when the rate changes. A 1-point hike means your monthly payment rises right away by the amounts noted above.

Variable fixed-payment mortgage: Your payment stays the same, but more of it goes to interest and less to principal. If rates rise enough, you can hit the trigger rate (the point where your payment no longer covers the interest), and you may need to increase your payment or make a lump-sum payment to avoid extending your amortization beyond the original term.

The Financial Consumer Agency of Canada notes that borrowers should confirm with their lender which type they hold and understand how rate increases will affect their specific mortgage.

Why Rate Hikes Might Return

Speculation about renewed rate increases typically arises when inflation accelerates or the economy overheats. The Bank of Canada raises rates to cool demand and bring inflation back to its 2 per cent target. After a prolonged period of rate cuts or stability, markets and economists watch economic data closely for signs that the central bank may shift course.

Read also: Bank of Canada Interest Rate Explained and How It Shapes Your Mortgage in Canada

As of October 2026, any discussion of rate hikes depends on inflation trends, employment data, GDP growth, and global economic conditions. Rates change frequently, and future moves are not guaranteed.

What to Do if You Have a Variable-Rate Mortgage

If you are concerned about rising rates, consider these steps:

  • Check your trigger rate and current amortization. Ask your lender where you stand and how much room you have before a rate hike extends your payoff timeline.
  • Review prepayment privileges. Many mortgages allow annual lump-sum payments (typically 10 to 20 per cent of the original principal) or increased regular payments (often up to 10 to 20 per cent higher). Paying down principal now reduces the base amount on which future rate increases apply.
  • Weigh switching to a fixed rate. You can lock in a fixed rate at renewal or, in some cases, during your term (though breaking a variable mortgage early to switch may incur a penalty, usually three months of interest). Compare the fixed rate available today against the risk of further variable-rate increases.
  • Budget for higher payments. If you plan to stay variable, stress-test your household budget against a scenario where rates rise by 1 to 2 percentage points.

The Term and Amortization Distinction

Remember that in Canada, your mortgage term (commonly 1 to 5 years) is when you renew or renegotiate, while your amortization (typically 25 or 30 years) is the full payoff period. A rate hike during your term affects your payments or amortization within that term, but you will have the opportunity to reassess and switch products at renewal.

Conclusion

A 1-point Bank of Canada rate hike would raise variable mortgage rates by 100 basis points, increasing monthly payments or extending amortization for hundreds of thousands of Canadian borrowers. The actual impact depends on your mortgage balance, your current rate, and whether you hold an adjustable-rate or variable fixed-payment mortgage. Review your mortgage details, confirm your trigger rate with your lender, and consider whether locking in a fixed rate or increasing prepayments makes sense for your situation. Rates and mortgage products vary by lender and province; consult a licensed mortgage broker or your financial institution for advice tailored to your circumstances.

Disclaimer: This article provides general educational information only and is not personalized financial, lending, legal, or tax advice. Mortgage rules, products, eligibility, and rates vary by province, territory, and lender. Interest rates change frequently; verify current rates and terms with a licensed mortgage professional before making any decision. For personal advice, consult a licensed mortgage broker, the Financial Consumer Agency of Canada, or a qualified financial advisor.