Key takeaways
- On October 28, 2026, the Bank of Canada raised its policy rate by 0.25 percentage points to 2.5%, and said further increases could be needed.
- Prime rose from 4.45% to 4.70% from October 29, 2026, so HELOC rates rose immediately.
- Each 0.25 point adds about $250 a year in interest for every $100,000 drawn on a HELOC.
- CMHC’s insured refinance for secondary suites allows up to 90% of the value after the work on homes under $2 million.
- The Bank of Canada’s next decision is December 9, 2026, a natural deadline for comparing a HELOC with a refinance.
Short answer: on October 28, 2026, the Bank of Canada raised its policy rate by 0.25 percentage points to 2.5%, the first increase of this cycle, and banks began raising their prime rate from 4.45% to 4.70% the next day, National Bank among them. Home equity lines of credit (HELOCs) are priced off prime, so if you are funding a renovation with a HELOC, your rate went up immediately. As a rule of thumb, every 0.25 point adds about $250 a year in interest for every $100,000 you borrow. The Bank’s next decision is on December 9, 2026.
A rate rise does not have to stop a renovation, but it does change which way of paying for it makes sense. This guide explains what changed, how it affects each financing option, and how to plan a renovation budget while rates are moving. It is general information, not financial advice: speak to your lender or a mortgage professional about your own situation. Rate figures come from the Bank of Canada and a major bank’s public announcement, checked on November 5, 2026.
What the Bank of Canada did, and why
The Bank raised its target for the overnight rate by 25 basis points to 2.5% on October 28, 2026. In its announcement it said inflation is “higher and more persistent” than it had projected in July, with CPI inflation expected to average 3% in 2027 before returning to 2% in the middle of 2028. It added that there could be a need to increase the policy rate further, but that it would proceed carefully.
In plain terms, the Bank has signalled that more increases are possible. The next scheduled announcement is December 9, 2026.
How the increase reaches your renovation budget
The overnight rate does not apply to you directly. It moves the banks’ prime rate, which moved from 4.45% to 4.70% effective October 29, 2026 at National Bank, as banks followed the Bank of Canada. Anything priced as “prime plus” moves with it:
- HELOCs are usually prime plus a margin, so the rate changes as soon as prime does.
- Variable-rate mortgages follow prime. Depending on the lender, either your payment changes or more of it goes to interest.
- Unsecured lines of credit also follow prime, usually at a higher margin.
- Fixed-rate mortgages are priced off bond yields rather than prime, so they do not move automatically, but new fixed offers can still rise.
The simple maths for a HELOC: interest is charged on what you have drawn. On $100,000, each 0.25 point is about $250 a year, or roughly $21 a month. On $150,000, the October increase costs about $375 a year. That is meaningful, but rarely the difference between renovating and not.
The main ways to pay for a renovation
| Option | How rates affect it | Often suits |
|---|---|---|
| HELOC | Moves with prime immediately | Projects paid in stages, where you only pay interest on what you draw |
| Refinance at renewal | Fixed or variable, locked at refinance | Larger projects where predictable payments matter |
| CMHC insured refinance for a secondary suite | Priced like an insured mortgage | Adding a basement or backyard rental unit, using the value after the work |
| Toronto HELP loan | City-set rates, current rates valid to Dec 31, 2026 | Energy upgrades such as heat pumps, insulation and windows |
| Savings or cash | No interest cost | Smaller projects, or reducing how much you borrow |
For secondary suites, CMHC’s insured refinance allows up to 90% of the property’s value after the work on homes under $2 million, which our basement suite financing guide explains in detail. Our renovation financing page covers the other options.
Does it still make sense to renovate?
That depends on your plans, but a few points are worth weighing:
- Moving costs more than borrowing more. In the GTA, the land transfer taxes, real estate commissions and moving costs of selling and buying are often larger than the extra interest on a renovation loan. Many of our clients renovate precisely because moving would cost more.
- Some renovations pay you back. A legal basement suite or a garden suite can earn rent that helps cover its own financing, and energy upgrades lower monthly bills while qualifying for rebates.
- Rates may rise again. If you are going to borrow anyway, it can make sense to arrange financing sooner rather than later, and to think about fixing part of the cost.
- Scope is the biggest lever. Phasing a project, or keeping the layout and plumbing where they are, can reduce what you need to borrow far more than a quarter-point rate move adds.
How to plan a renovation budget while rates are moving
- Get a fixed, itemized quote first. You cannot plan financing without knowing the real number, and a fixed price protects you from cost creep while rates rise.
- Stress-test the payment. Work out what your HELOC or variable payment would be if prime rose another 0.50 point, and make sure the budget still works.
- Draw only what you need, when you need it. With a HELOC, interest is charged on what you have drawn, so match draws to the payment schedule.
- Use the rebates that exist. Heat pump, insulation and window rebates, the Multigenerational Home Renovation Tax Credit and the Home Accessibility Tax Credit all reduce the net cost.
- Talk to your lender before December 9. If you are deciding between a HELOC and a refinance, the next rate announcement is the natural deadline for that conversation.
Plan your renovation with real numbers
We give every client a fixed, itemized estimate, which is the starting point for any financing conversation with your bank. Book a free consultation, or browse our renovation cost guides to see typical budgets.
Renovation financing and interest rate FAQs
What did the Bank of Canada do in October 2026?
On October 28, 2026, it raised its policy rate by 0.25 percentage points to 2.5%, and said there could be a need to raise it further. The next announcement is December 9, 2026.
How does the rate increase affect my HELOC?
HELOCs are priced off prime, which banks raised from 4.45% to 4.70% from October 29, 2026. Each 0.25 point adds about $250 a year in interest for every $100,000 drawn.
Is a HELOC or a refinance better for a renovation?
A HELOC suits projects paid in stages because you pay interest only on what you draw, but its rate moves with prime. A refinance can lock in a rate and payment for larger projects. Your lender can compare both for your situation.
Should I wait for rates to fall before renovating?
The Bank of Canada has said further increases may be needed, so waiting is not guaranteed to lower your cost. For many GTA homeowners, renovating still costs less than moving.
Are there programs that reduce what I need to borrow?
Yes. Heat pump and energy rebates, Toronto’s Home Energy Loan Program, the Multigenerational Home Renovation Tax Credit and the Home Accessibility Tax Credit can all reduce the net cost of eligible work.