BoC Opens the Door to Rate Hikes: What It Means for Your Mortgage

 

Published September 4, 2026

The Bank of Canada held its policy rate at 2.25% on September 2 — the seventh straight hold — but Governor Tiff Macklem didn't sound like a central banker done for the year. He told reporters the Bank is "prepared to raise interest rates, and if it takes more than one increase, we're prepared to do that," if inflation stays too high. That's a real shift in tone, and it lands right as a wave of Canadians hit their mortgage renewal date.

Here's what changed, who's forecasting what, and what it actually means for your payment.

Why the Bank Suddenly Sounds Hawkish

Canada's annual inflation rate has climbed to around 3% — a full point above the Bank's 2% target — and the Bank is pointing squarely at energy prices. Oil has stayed elevated because of the Iran conflict and disruption near the Strait of Hormuz, pushing gas prices up and dragging headline CPI with it. Core inflation, which strips out food and energy, is still sitting closer to 2%, but Macklem said the risk is that a temporary energy spike turns into something stickier.

The Bank also quietly dropped a line from its previous statement that said the policy rate was "at the right level" to balance inflation and growth. Removing that language is itself a signal: officials are no longer committing to steady-as-she-goes.

What It Means for You: A hold today doesn't mean a hold in October. If you're floating a variable-rate mortgage or shopping for a renewal, the ground under "rates are done moving" just shifted.

The Bank Split: Who's Calling a Hike

All 35 economists surveyed by Reuters correctly predicted Wednesday's hold, so nobody's surprised by that part. The disagreement is about what happens next, and it's a wider split than usual among Canada's biggest bank economists:

• National Bank and Scotiabank are calling for a hike to 2.50% at the October 28 meeting, with Scotiabank and National Bank both projecting the rate could reach 2.75% by year-end.
• TD and BMO expect the Bank to hold at 2.25% through the rest of 2026 and into 2027.
• CIBC sees the hold continuing near-term but doesn't rule out a move if oil-driven inflation persists.
• RBC is the outlier on the other side of the timeline — it expects hikes eventually, but stretched out to 3.25% by the end of 2027 rather than this fall.

Money markets, for what it's worth, have moved to pricing in roughly a 25-basis-point increase by December, plus a few more quarter-point moves next year — a meaningful repricing from where things sat before Wednesday's press conference.

Variable-Rate Holders: What Actually Changes

Nothing changes today. Your rate is prime minus your discount, and prime hasn't moved. But the risk you're carrying just got a bit more real. If the Bank does move to 2.50% by spring, that adds roughly $200 to $240 a month to a $400,000 variable-rate mortgage. The lowest published variable rates are sitting around the mid-3% range right now — comfortably below fixed in most cases — but that gap is exactly what would start closing if the hawkish scenario plays out.

Renewing Soon? The Numbers Are Already Ugly for Some

This isn't a hypothetical for a lot of homeowners. By the end of 2026, roughly a third of Canadian mortgage holders are expected to face higher payments simply from renewing loans that were originated at pandemic-era rates. Of that group, about three-quarters hold five-year fixed mortgages, and their payment increases are averaging around 20%.

Variable-rate renewers are more split: some are actually seeing payments fall as far as 7% as the Bank's earlier cuts flow through, while roughly 10% are looking at payment jumps of more than 40%, depending on when their term started. Equifax Canada's Q1 data already shows mortgage delinquency balances up 32% year-over-year nationally — and 52% higher in Ontario specifically — so the strain from this renewal wave isn't just theoretical.

Lock In or Wait?

There's no universal answer here, but the trade-off is clearer than it's been in a while:

• The case for locking in a fixed rate now: if National Bank and Scotiabank are right, variable rates catch up to today's fixed rates within a year or two, and you'd have missed the window to lock in before bond yields (which drive fixed rates) price in the hike expectation.
• The case for staying variable or waiting: a majority of economists, and four of the six largest banks, still expect a hold through the rest of this year. If the Iran-driven oil spike fades and inflation cools back toward 2%, the hawkish talk may not turn into an actual hike at all.

What It Means for You: If your renewal falls before the October 28 decision, get rate quotes now rather than waiting — most lenders let you lock a rate 90-120 days out, which means you can hold today's pricing and still switch down if rates ease before your close date.

What to Watch Next

The Bank's next scheduled decision is October 28, alongside its final Monetary Policy Report of 2026. Between now and then, watch for August and September CPI prints, the jobs data landing this week, and any de-escalation (or escalation) out of the Strait of Hormuz — oil is doing most of the work behind this inflation scare, and oil is the thing most likely to flip the Bank's tone back the other way.

---

This article is for general information and isn't financial advice. Mortgage rates and terms vary by lender and individual circumstances — speak with a licensed mortgage broker before making renewal or refinancing decisions.