Rates Are Rising Again: What the Bank of Canada Hike Means for Landowners

Imagine you own a few acres on the edge of town. For a couple of years the talk around the kitchen table has been about when interest rates would come down far enough for builders to come knocking again. Then, on a Wednesday in late October, the news went the other way.

On October 28, 2026, the Bank of Canada raised its key interest rate by a quarter of a percentage point, to 2.5%. It was the first increase since 2023. If you own land, even land you have no plans to sell this year, that decision travels further than you might think.

What actually changed

The Bank of Canada sets what is called the policy rate, sometimes known as the overnight rate. It is the rate at which banks lend to each other for very short periods, and it acts as the anchor for almost every other borrowing cost in the country.

The Bank said it moved because inflation is running hotter and looks more stubborn than it expected. Its release points to persistently high oil prices, with consumer inflation around 3% since April and expected to rise to about 3.5% by the end of the year. It also said there “could be a need to increase the policy rate further,” while adding that it would proceed carefully. The next scheduled decision is December 9, 2026.

Within hours, the big banks followed. As the Financial Post reported, RBC, TD, BMO, CIBC, Scotiabank and National Bank all raised their prime rate from 4.45% to 4.70%, effective October 29. Prime is the benchmark banks use to price lines of credit, variable-rate mortgages and many business loans. When it moves, a lot of monthly payments move with it.

Why a rate on Bay Street reaches your back forty

It helps to think about how the people who buy land actually pay for it. A builder rarely buys a farm with cash. They borrow, often at a rate tied to prime, and then carry that loan for years while the land works its way through planning approvals and servicing. Every month of waiting costs interest. Development people call this carrying cost.

When rates go up, carrying costs go up. A buyer who planned to hold land for five years before building now faces a bigger bill to get there. Because the price of the finished homes does not rise just because borrowing got more expensive, something else has to give, and very often it is the price the buyer is willing to pay for the land. That is why even a small move in rates can show up as softer offers, longer conditions or buyers who simply wait.

The same logic applies to anyone hoping to build rental apartments. A rental building earns its keep slowly, month by month. Higher borrowing costs eat into that income, and projects that worked on paper last spring may need another look today.

The quiet importance of federal programs

For apartment builders in particular, much of the financing in Canada now runs through programs at the Canada Mortgage and Housing Corporation, or CMHC. Two names come up again and again.

The first is MLI Select. This is mortgage insurance for rental buildings, and it works on a points system. A builder who commits to things like affordable rents, energy efficiency or accessibility earns points, and more points unlock better terms. According to CMHC, at the higher levels that can mean borrowing up to 95% of a property’s value and paying the loan off over as long as 50 years. A longer repayment period, or amortization, means smaller payments, which can be the difference between a project that works and one that does not.

The second is the Apartment Construction Loan Program, or ACLP. CMHC describes it as low-cost funding for rental projects during the riskiest stretch, from construction through to when the building is full and stable. Loans start at $1 million and can cover up to 100% of the cost of the residential part of a project, with a fixed rate locked in at the start. CMHC said in its 2025 annual report that it had committed more than $29 billion through the program to help build more than 74,500 rental units by the end of 2025.

Programs like these soften the blow of higher rates for rental builders, and that matters to landowners because rental builders are among the buyers for well-located land.

All eyes on November 5

That brings us to the next date on the calendar. Finance Minister François-Philippe Champagne has said he will table Budget 2026 on Thursday, November 5, according to the Department of Finance. Federal budgets are often where housing programs are expanded, trimmed or reshaped. Whether anything changes for MLI Select or the ACLP will not be known until the document is out, and it would be unwise to assume either way. What is fair to say is that builders and lenders will be reading those pages closely, and their appetite for land in the months ahead may depend partly on what they find.

What a landowner might do now

A rate hike is not a reason to make a rushed decision in either direction. Land is a long game, and rates have risen and fallen many times over the life of most family holdings. It does make sense, though, to adjust your expectations to the market you are actually in.

If you are fielding offers, ask how the buyer plans to finance the purchase and how long their conditions run. A buyer relying on expensive short-term money may be more likely to walk away if rates keep climbing. If you carry a line of credit or a variable-rate loan against your property, it is worth checking what the new prime rate means for your own payments. And if you have been thinking about a partnership with a builder rather than an outright sale, it may be worth watching what the federal Budget does for rental programs before you settle on terms.

Most of all, stay informed rather than anxious. At Red Leaf Real Estate, we keep a close eye on rates, federal programs and land deals across the GTHA. If you would like to talk through what this means for your property, we are glad to have that conversation, with no pressure.

This article is general information only and is not legal, planning or financial advice. Consult a qualified professional about your specific circumstances.