What Happens When The Bank of Canada Raises Interest Rates?

By Alex McFadyen | General | 8 min read | Published 2026-09-15

The short answer: When the Bank of Canada raises its rate, payments on variable mortgages and lines of credit go up, and fixed rates move separately with bond yields. Since 2010, every hiking cycle has had at least 3 increases. Update, October 28, 2026: the Bank of Canada raised its policy rate by 0.25%. Read what to do now that rates are up.

The Bank of Canada has held its key interest rate steady for 10 months, but that doesn't mean your mortgage rate is safe. While variable rates have been stable, the bond market, which dictates fixed mortgage rates, has been making significant moves. The 5-year Government of Canada bond yield is at its highest point in over two and a half years, pushing fixed rates higher. At the same time, other market indicators are pricing in at least two future rate hikes from the Bank of Canada. History gives us a clear warning: since 2010, the Bank has never run a rate-hiking cycle with fewer than three increases. The last three cycles involved three, five, and even ten consecutive hikes. Understanding these patterns and the data behind them is essential if you're choosing a mortgage or have a renewal coming up in the next year.

Key Takeaways

• History Suggests Multiple Hikes: Since 2010, Bank of Canada rate hiking cycles have always included at least three increases. The most recent cycle (2022-2023) saw ten hikes in just 16 months.
• Fixed and Variable Rates Move Independently: The Bank of Canada's overnight rate controls variable mortgages, while Government of Canada bond yields drive fixed mortgage rates. They don't always move together.
• The Market is Pricing in Hikes: The 2-year Government of Canada bond yield, a strong indicator of future Bank of Canada moves, has risen enough since June 2026 to price in two quarter-point rate hikes.
• The Variable Rate 'Cushion' is Shrinking: The savings you get with a variable rate acts as a cushion against future rate increases. With the market predicting hikes, you need to calculate if that cushion is large enough for your risk tolerance.