Prime Hits 4.70% Today: Your Variable Mortgage Rate Beats Fixed Until the Fourth Hike

Thursday, 29 October 2026. The Bank of Canada raised its policy rate 25 basis points to 2.50% yesterday, the first increase since July 2023, and the major banks lift prime to 4.70% from 4.45% today. If you already hold a variable mortgage rate, your rate rises a quarter point this week — about $78.63 a month on a $600,000 balance. If you are choosing between a variable mortgage rate and a fixed one right now, the arithmetic is less obvious than the headline suggests. At the best advertised rates today, 3.41% variable against 4.34% insured five-year fixed, the variable starts 93 basis points ahead and stays ahead through three more hikes. It only loses on the fourth.

The number that matters most from yesterday is not the hike. It is what the Bank did to its own inflation forecast: the 2027 projection went from 2.0% in July to 3.0% in October, a full percentage point in one revision. That is why the statement says more increases may be needed, and why the four-hike threshold for a variable mortgage rate below is a live question rather than an academic one.

What the Bank actually did, and the one number it revised

The target for the overnight rate is 2.50%, the Bank Rate 2.75% and the deposit rate 2.45%. The Bank's reasoning: inflation has run higher and more persistently than it projected in July, growth has picked up, and it wanted to limit the risk of high energy prices spreading into other goods and services.

CPI inflation has run near 3% since April and the Bank expects about 3.5% by year-end. Excluding gasoline, September inflation was 2.2%, and core measures remain close to 2%. GDP grew 3.3% in the second quarter, indicators point to roughly 2% in the third, and unemployment has sat near 6.5% for months.

Set the October projections beside July's and the revision is stark.

Projection	July 2026 report	October 2026 report	Revision
CPI inflation, 2027	2.0%	3.0%	+1.0 point
CPI inflation, 2028	2.1%	about 2% by mid-year	little changed
Real GDP growth, 2026	0.7%	1.0%	+0.3 point
Real GDP growth, 2027	1.8%	2.0%	+0.2 point
Real GDP growth, 2028	1.8%	2.0%	+0.2 point

A central bank that has just moved its own one-year-out inflation forecast up a full percentage point, while revising growth up as well, has removed most of its reasons to sit still. The guidance reads: there could be a need to increase the policy rate further, but given uncertainties, Governing Council agreed to proceed carefully. That is a warning paired with a brake. The next decision is 9 December 2026, and any path from here is a market expectation that can change with one inflation print.

The October hike odds piece put the market probability at 54% beforehand; this outcome settles it.

Prime is 4.70% today: what your variable mortgage rate does

Your variable mortgage rate is prime minus a contractual discount. If your commitment letter says prime minus 1.20%, you were at 3.25% and you are at 3.50% once your lender's prime moves. The discount does not shrink; the benchmark underneath it rises. On a 25-year amortization with the payment recalculated, here is what a quarter point costs.

Balance	Payment at 3.25%	Payment at 3.50%	Monthly increase	Per year
$400,000	$1,944.66	$1,997.08	$52.42	$629.01
$500,000	$2,430.83	$2,496.35	$65.52	$786.26
$600,000	$2,917.00	$2,995.62	$78.63	$943.51
$750,000	$3,646.24	$3,744.53	$98.28	$1,179.39

Whether you see that increase depends on which kind of variable mortgage rate you hold. An adjustable-rate mortgage repays on a recalculated payment, so the numbers above land on your next payment date. A fixed-payment variable keeps the payment flat and sends more of it to interest, stretching your amortization — and if enough hikes stack up, your payment stops covering the interest at all. That threshold is your trigger rate, worth knowing rather than discovering; the trigger rate breakdown works through the mechanics, and the prime rate explainer covers how lenders pass a policy change through.

The four-hike rule: when a variable mortgage rate loses to fixed

Take a $600,000 mortgage on a 25-year amortization. The best advertised insured five-year fixed is 4.34% and the best advertised five-year variable mortgage rate is 3.41%, both as of 28 October 2026. The fixed payment is $3,267.68; the variable payment is $2,967.19 — $300.49 a month less, or $3,605.85 a year of cash flow that stays with you.

Now assume the Bank keeps going, 25 basis points at a time at successive decision dates, with the variable payment recalculated at each step. Over the five-year term, here is the interest each path produces against the fixed mortgage's $121,433.98.

Further hikes	Rate reached	Final payment	Interest over 5 years	Against fixed
None	3.41%	$2,967.19	$94,855.42	$26,578.56 ahead
One	3.66%	$3,046.29	$101,846.74	$19,587.23 ahead
Two	3.91%	$3,126.24	$108,724.51	$12,709.47 ahead
Three	4.16%	$3,206.80	$115,357.65	$6,076.33 ahead
Four	4.41%	$3,287.93	$121,745.36	$311.38 behind
Five	4.66%	$3,369.83	$128,015.44	$6,581.46 behind

Four more hikes is the line. Three and the variable mortgage rate is still $6,076.33 cheaper over the term. Four and it is $311.38 more expensive — a rounding error on $600,000, which makes the fourth hike the point of indifference rather than of regret. Five and the gap opens to $6,581.46.

Four more hikes would put the policy rate at 3.50% and prime at 5.70%. That is a scenario, not a forecast, and sits above what most published commentary expects. A single hike in December, the path the statement points at most directly, leaves the variable mortgage rate $19,587.23 ahead.

Why the fourth hike is the line and not the third

At four hikes the variable mortgage rate finishes the term at 4.41%, which is 7 basis points above the 4.34% fixed rate, and still loses by only $311.38. That is not a coincidence. Interest saved early is worth more than interest saved late, because you pay it on a larger balance and the saving arrives sooner. A variable that spends its first year 93 basis points below the fixed rate banks roughly $5,463.58 of interest in that year alone, and a hike arriving in month 14 cannot take it back.

So timing matters nearly as much as the count: front-loaded hikes erode the advantage quickly, and hikes deferred into 2027 barely dent it. Nobody knows the schedule, which is why this is worth running on paths rather than one guess.

The ending balance moves far less than the interest: across all six paths it spans $516,823.99 to $527,446.84, a range of about $10,600. Most of the difference shows up as cash flow during the term, not equity at the end of it.

What this does to a renewal in the next six months

Fixed rates are not set by the Bank of Canada. They track the bond market, and the five-year Government of Canada yield was 3.57% on 27 October 2026, the latest published observation. Against a 4.34% insured five-year fixed that is a 77-basis-point spread, on the ordinary side of normal. The hike was widely anticipated, so much of it already sat in fixed pricing; the bond yield and fixed rate relationship explains why a policy move can reach fixed quotes with almost no visible effect.

What changed yesterday is the direction of travel. Every renewal decision of the last two years was made where the next move was down or nothing. Renew in the next six months and the Bank has said the next move may be up, with its own 2027 inflation projection a full point higher than in July.

That argues for putting a rate hold in place rather than waiting for better pricing. A hold costs nothing, most lenders extend one 90 to 120 days before maturity, and it caps your downside without giving up your upside — if rates fall before closing, you take the lower rate.

What to do this week

1. Find out which kind of variable mortgage rate you hold. Read the commitment letter for "adjustable" or for language about the payment staying fixed. The two behave very differently under a hike.
2. Confirm your discount off prime in writing. It is contractual for the rest of your term and tells you your exact rate at any future prime.
3. If you hold a fixed-payment variable, ask your lender for your trigger rate in writing, with your current effective amortization.
4. If maturity falls within 120 days, get a rate hold now. Ask the hold period and whether it floats down.
5. Run the four-hike table on your own balance and amortization. The breakeven count shifts with both, and with your discount off prime.
6. Ask for fixed and variable quoted on the same day, in writing. Rates from different weeks are not comparable, and the gap between them is the whole decision.
7. Do not break a fixed mortgage to chase a variable mortgage rate without pricing the penalty. The interest rate differential can run into five figures.
8. Note the two dates that matter: 6 November for October labour force figures, 16 November for October CPI. Those shape the 9 December decision more than anything else.

Common questions

Will the Bank of Canada raise rates again in December?

Nobody can tell you that, and any number you see is a market expectation that can change. On the record is the statement's own language: there could be a need to increase the policy rate further, but Governing Council agreed to proceed carefully given uncertainties including Canada-United States trade relations. The Bank projects CPI near 3.5% by year-end. The 9 December decision turns largely on the two releases before it: labour force figures on 6 November and CPI on 16 November.

Should I lock in my variable mortgage rate now?

The table above is the honest answer: at today's advertised pricing, your variable mortgage rate has to absorb four more quarter-point hikes before it costs more than today's fixed over five years, and at four the difference is $311.38. Locking in buys certainty and gives up roughly $300 a month of cash flow. If that cash flow is what makes your budget work, certainty is worth paying for regardless of the arithmetic. If it is not, the arithmetic says you are being paid 93 basis points to carry the risk.

Does the hike change what I qualify for?

Yes, and not in the direction most people assume. The minimum qualifying rate is the greater of your contract rate plus two points or 5.25%. A 3.41% variable qualifies at 5.41%, which on a $600,000 mortgage over 25 years is a qualifying payment of $3,630.98. A 4.34% fixed qualifies at 6.34%, a qualifying payment of $3,979.02. The lower contract rate clears a lower bar, so a variable mortgage rate can still support a larger mortgage than a fixed one at the same income, even after this hike.

The bottom line on your variable mortgage rate

Prime at 4.70% costs a $600,000 variable holder $78.63 a month and $943.51 a year. For anyone choosing today, a variable mortgage rate at 3.41% against a 4.34% fixed survives three more hikes with $6,076.33 to spare and breaks even on the fourth. The case for a variable mortgage rate is not that rates will fall — the Bank has just told you they may not. It is that 93 basis points of head start is a wide margin, and the policy rate would have to reach 3.50% to close it. Rates here are the lowest advertised figures from a rate aggregator on 28 October 2026, not quotes; what you are offered depends on your property, credit and income.