Bank of Canada's First Rate Hike Since 2023: A Commercial Borrower's Playbook for the Golden Horseshoe

Short answer: On October 28, 2026, the Bank of Canada raised its policy rate by 25 basis points to 2.50%. It was the Bank's first increase since July 2023, and bank prime rose to 4.70%. Variable-rate commercial loans and operating lines got more expensive right away. Fixed commercial rates follow bond yields instead, and those have eased since late September, so owners renewing, refinancing or buying in the next 6 to 12 months should stress-test their numbers and plan their rate lock carefully.

Key takeaways

• The overnight rate went from 2.25% to 2.50% on October 28, 2026. Prime is now 4.70%, and the next decision is December 9.
• The Bank pointed to persistently high energy prices. CPI inflation was 3.1% in September, and the Bank expects about 3.5% by year end.
• Fixed commercial and CMHC-insured rates price off bond yields, not the overnight rate. The 5-year Government of Canada yield climbed from 2.67% at the end of February to 3.69% in late September, then eased to 3.39% on November 5.
• Deal activity is holding up. Altus Group reports GTA commercial investment of $15.1 billion through Q3 2026, up 39% year over year.
• If you have a maturity, a variable loan or a purchase coming up, rerun your debt service coverage at a higher rate now, not at renewal.

Why did the Bank of Canada raise rates in October 2026?

For most of the past year the story was a pause. The Bank held its policy rate at 2.25% from October 2025 through its September 2026 decision, and plenty of investors assumed the next move would be a cut. Instead, on October 28 it raised the rate by a quarter point to 2.50%.

The reason is inflation, mostly from energy. Oil prices have stayed high with the war in the Middle East, and higher fuel costs are pushing up the cost of production and transportation. CPI inflation was 3.1% in September, and the Bank expects it to reach about 3.5% by the end of the year. Core inflation is still close to 2%, but the Bank expects businesses to pass more of their costs through over the next year. It also noted that growth picked up through the middle of the year, with solid consumer spending and a rebound in business investment, which gave it room to act.

The Bank didn't promise more hikes, but it left the door open. In its words, "There could be a need to increase the policy rate further, but given uncertainties, Governing Council agreed to proceed carefully." The next decision is December 9.

How does a rate hike affect commercial mortgage rates?

This is where a lot of owners get confused, so it's worth slowing down. There are two different rates at work.

Variable loans and lines of credit

These move with prime, and prime moves with the overnight rate. Prime went up 25 basis points to 4.70%. If you have a variable-rate commercial mortgage, a construction loan or an operating line secured against your building, your cost went up as soon as your lender moved its prime rate.

Fixed-rate commercial and CMHC-insured loans

Fixed commercial mortgages are priced off Government of Canada or Canada Mortgage Bond yields plus a lender spread. That spread depends on the asset, the borrower and the leverage. CMHC-insured multifamily loans, including MLI Select, follow the same bond benchmarks and generally carry tighter spreads than conventional debt.

Bond yields have been anything but calm. Bank of Canada data shows the 5-year Government of Canada yield closed February at 2.67% and reached 3.69% in late September. It drifted lower through October. Then on November 5, a 4.4% one-day drop in the S&P 500 sent money into bonds, and the 5-year closed at 3.39%, roughly where it started September.

So the overnight rate went up while fixed-rate benchmarks eased. That gap is the opportunity, and the risk.

What does a higher rate do to a real deal?

Photo: Lukas Blazek / Pexels

Here's a simple example using round numbers. Take a $2,000,000 loan on a 25-year amortization. At 5.0%, the monthly payment is about $11,692. At 5.5%, it's about $12,282. That's roughly $590 more a month, or about $7,080 a year. (These figures assume monthly compounding. A lender that compounds semi-annually will show slightly lower payments, but the gap is about the same.)

Now say the property earns $175,000 in net operating income. At 5.0%, the debt service coverage ratio is about 1.25x. At 5.5%, it drops to about 1.19x. If your lender's minimum is 1.20x, half a point just cost you loan proceeds. You either put in more equity, find more income or negotiate a lower price.

That's the real effect of rate moves on commercial property. It rarely kills a good deal outright. It shrinks the loan, and the loan sets the price buyers can pay.

It rarely kills a good deal outright. It shrinks the loan, and the loan sets the price buyers can pay.

What does this mean for Golden Horseshoe investors, owners and tenants?

Photo: Brett Sayles / Pexels

The market hasn't frozen. Altus Group reports GTA commercial investment of $15.1 billion through Q3 2026, up 39% from a year earlier. Multifamily volume jumped 273% to $4.1 billion, industrial rose 10% to $4.4 billion, and retail was the soft spot, down 22% to about $1.4 billion. Hamilton, Burlington and Brantford compete for much of the same capital, so expect buyers to keep chasing well-located multifamily and small-bay industrial, while sellers of weaker retail may need to sharpen their pricing.

What changes is how carefully you need to underwrite. Here's what I'd do depending on where you sit.

If your mortgage matures in the next 12 months

• Get your current rent roll, operating statements and property tax bills together now.
• Ask your lender or mortgage broker what an early renewal or rate hold looks like. With yields moving week to week, a 90 to 120 day hold can be worth real money.
• Rerun your coverage at a rate at least half a point above today's quote. If it gets tight, start working on leasing or expense fixes before the lender asks.

If you're carrying variable-rate debt

• Price out a fix. After the early-November bond rally, fixed benchmarks are lower than they were in late September, while prime just went up.
• Look at your operating line too. Many business owners forget that the line secured by their building floats.

If you're buying

• Underwrite at today's rate plus a cushion, and build your offer from the loan you can actually get.
• For residential buildings with five or more units, look hard at CMHC MLI Select. It allows amortizations of up to 50 years for projects that earn enough points on affordability, energy efficiency or accessibility, which helps cash flow. The commitments have to make sense for the building.
• Vendor take-back financing and assumable mortgages get more valuable when rates rise. Ask for them.

If you're a business owner or tenant

• Owner-occupiers buying their own building should compare total occupancy cost against a lease at the new rate, not last year's.
• Tenants renewing leases have some leverage on older retail and office space. Landlords facing higher debt costs often prefer a stable tenant to a vacancy.

Why financing decides deals right now

In this market, the financing is the deal. Two buyers can look at the same Hamilton six-plex or Brantford industrial unit and reach very different prices because one has better debt. Shop lenders, compare conventional, CMHC-insured and private options, and know your rate-lock timing before you firm up. Run these numbers before you sign, not after.

Frequently Asked Questions

What is the Bank of Canada's policy rate after the October 2026 decision?

2.50%, up from 2.25%. The October 28, 2026 increase was the Bank's first since July 2023, and prime at the major banks rose to 4.70%.

Do fixed commercial mortgage rates go up when the Bank of Canada hikes?

Not directly. Fixed commercial and CMHC-insured rates are priced off Government of Canada and Canada Mortgage Bond yields plus a lender spread. Those yields can move the other way, as they did in early November 2026.

When is the next Bank of Canada rate announcement?

December 9, 2026. The Bank said there could be a need to raise the policy rate further but that it will proceed carefully given the uncertainty.

Should I lock in a fixed rate on my commercial property now?

It depends on your maturity date, your coverage ratio and how long you plan to hold. If a small rate rise would push your coverage below your lender's minimum, locking or holding a rate reduces that risk. Ask your lender or broker about hold periods and prepayment terms before deciding.

Is it still a good time to buy commercial real estate in Hamilton?

Good assets are still trading, and GTA-area investment volume is up sharply this year. The key is to underwrite at a higher rate, base your offer on realistic financing, and consider options like CMHC MLI Select or vendor take-back financing where they fit.

Talk to Above All Commercial

If you're buying, selling, leasing or refinancing commercial property in Hamilton, Burlington, Brantford, Ancaster or elsewhere in the Golden Horseshoe, Above All Commercial can help you run the numbers before rates move again.

Sources

Bank of Canada, rate announcement, October 28, 2026: https://www.bankofcanada.ca/2026/10/fad-press-release-2026-10-28/

Bank of Canada, Governor's opening statement, October 28, 2026: https://www.bankofcanada.ca/2026/10/opening-statement-2026-10-28/

Bank of Canada, Canadian bond yields: https://www.bankofcanada.ca/rates/interest-rates/canadian-bonds/

Bank of Canada, posted interest rates offered by chartered banks (prime rate): https://www.bankofcanada.ca/rates/banking-and-financial-statistics/posted-interest-rates-offered-by-chartered-banks/

Statistics Canada, Consumer Price Index, September 2026: https://www150.statcan.gc.ca/n1/daily-quotidien/261019/dq261019a-eng.htm

CMHC, MLI Select: https://www.cmhc-schl.gc.ca/professionals/project-funding-and-mortgage-financing/mortgage-loan-insurance/multi-unit-insurance/mliselect

Altus Group, Toronto commercial real estate market update, Q3 2026: https://www.altusgroup.com/insights/toronto-commercial-real-estate-market-update-q3-2026/

Associated Press, S&P 500 falls 4.4%, November 5, 2026: https://apnews.com/article/stocks-markets-ai-midterm-oil-trump-7ee9c212805aa5e70cf34d25aab7a36e