Canadians with variable-rate mortgages and loans could face higher borrowing costs this week as the Bank of Canada prepares its next interest rate decision.

The central bank is scheduled to announce its decision Wednesday, Oct. 28. Its policy rate stands at 2.25 per cent, unchanged since October 2025. 

A Reuters poll conducted Oct. 21 to 23 found 19 of 34 economists expected a quarter-percentage-point increase, which would bring the rate to 2.5 per cent. 

The prospect comes as higher gasoline prices push up Canada’s inflation rate. Statistics Canada reported consumer prices rose 3.1 per cent in September compared with a year earlier, following a three per cent increase in August.

Gasoline prices were 27.8 per cent higher than a year earlier. However, excluding gasoline, inflation slowed to 2.2 per cent from 2.4 per cent, showing that price pressures were not accelerating across the board. 

Two measures used by the Bank of Canada to track underlying inflation also eased in September. These measures reduce the influence of unusually large price changes, helping show whether inflation is spreading across everyday goods and services.

For borrowers, the effect of any increase would depend on their loan agreements and lenders’ responses as these policy rates influence lenders’ funding costs and prime lending rates, which are used to price many variable-rate mortgages and other loans. 

As an illustration, a quarter-percentage-point increase applied to a constant $100,000 loan balance would add approximately $250 in annual interest, or about $21 a month. That calculation assumes the lender passes through the full increase and excludes fees, compounding and changes in the balance.

Some variable-rate mortgage holders could see payments rise. Others with fixed payments could have more of each payment directed toward interest, leaving less to reduce the amount borrowed.

Existing fixed-rate mortgages would retain their contracted rates until the end of their terms. Borrowers renewing or taking out a new mortgage would face the rates available at that time. 

Alongside Wednesday’s decision, the Bank of Canada will release its quarterly Monetary Policy Report, providing an updated economic and inflation outlook.