The Bank of Canada raised its policy rate by a quarter point to 2.5% on October 28, its first increase since July 2023, and said another move could follow.[1] The headline is about energy. Oil prices and refinery margins have kept CPI inflation near 3% since April, and the Bank now expects about 3.5% by year-end and an average of 3% through 2027.[1][2]
For Ontario rental owners, the more useful material is a few paragraphs deep in the Monetary Policy Report. Read together, they describe a squeeze: the cost of running and building housing is projected to rise while rent growth keeps easing. And the quarter point lands differently depending on where you sit in the market.
The short version
- The policy rate is now 2.5%. The big banks moved prime to 4.70% the same day.[1][3]
- The Bank projects shelter services inflation rising from a little over 1% at the end of 2026 to about 2% in 2027, driven by construction and maintenance costs and borrowing costs, with easing rent inflation as a partial offset.[2]
- It expects residential investment to grow by less than 1% a year on average in 2027 and 2028.[2]
- The five-year Government of Canada yield, the benchmark for most fixed-rate mortgage pricing, averaged about 2.69% in October 2025. It closed at 3.57% the day before the decision.[4]
If you own a stabilized building
A building with fixed-rate debt feels nothing from this decision until its mortgage renews. The pressure shows up on the operating side, and the Bank spelled out why. Higher energy and import costs raise the price of the materials and equipment used to build and maintain housing, and the Bank expects those costs to flow into shelter prices over the next year.[2] Fuel, contractor call-outs, replacement appliances and capital projects all fall in that category.
Rents point the other way. In Rentals.ca and Urbanation's latest report, which covers September listings, London's average one-bedroom asking rent was $1,628, down 4.7% from a year earlier. Windsor's was $1,467, down 12.6%.[5] Province-wide, asking rents across all unit types were 4.8% lower. For units already rented, Ontario's 2027 guideline is 1.9%.[6]
The MPR doesn't forecast rents city by city. But costs projected to rise faster than rents is the setup that compresses net operating income, even where occupancy holds. Owners of older stock, where maintenance is a bigger share of spending, feel it first.
If you are building
The Bank is not expecting a construction recovery. It projects that residential investment will barely grow over the next two years, held back by affordability, slow population growth and higher borrowing costs, with pricier energy and imported inputs adding to building costs.[2] Canada's new counter-tariffs on about $28 billion of U.S. goods fall mostly on intermediate inputs such as steel and aluminum.[2]
That cuts two ways. Projects underway face higher hard costs and, where construction debt floats with prime, a higher carrying cost from today. For owners of existing buildings, though, a thinner pipeline in 2027 and 2028 means less new competition when today's lease-ups are absorbed. Southwestern Ontario's softer rents partly reflect a wave of completions. A slower pipeline won't fix that quickly, but it does mean less new supply arriving later.
If you are in Windsor or London
This is the section with the most local content. Since July, trade talks with the U.S. have broken down. Washington has used Section 338 of the Tariff Act of 1930 to impose a 50% tariff on a range of Canadian goods regardless of CUSMA treatment. The MPR names machinery and equipment, plastics, furniture, and wood and paper products among them.[2] The Bank estimates the average U.S. tariff on Canadian goods at 7.5%, up from 5.0% in July, and expects GDP growth to slow to below 1% in the fourth quarter.[2]
Machinery and plastics are not abstract categories in Windsor-Essex, which has a large tool, die, mould and plastics manufacturing base, or in London's industrial economy. The Bank notes that about 80% of Canadian exports to the U.S. remain tariff-free, so the direct hit is concentrated.[2] The trouble is that it is concentrated in industries these two cities depend on. Both started from weak labour markets: Statistics Canada's September survey put London's unemployment rate at 8.4% and Windsor's at 7.3%.[7]
For rental demand, renter incomes matter more than the policy rate. Higher rates keep some would-be buyers renting longer, which helps occupancy. Job losses in tariff-exposed plants do the opposite, and they hit the tenants whose rent-to-income ratios are already stretched. CMHC's fall mortgage report, released this week, ranked London and Windsor second and third behind Toronto for the rise in mortgage arrears over the past year (see our October 28 piece). That is the same pressure, showing up on the ownership side.
If you lend, or invest with lenders
The policy rate drives floating-rate construction and bridge loans, which reprice right away. Fixed-rate and CMHC-insured permanent debt follows bond yields, and those have already moved. The MPR attributes most of this year's rise in Canadian long-term yields to markets expecting higher policy rates, rather than to investors demanding more compensation for holding long bonds.[2] In practice, the borrowers facing the biggest payment change are those whose debt was priced in 2025 and comes up for renewal into today's curve. We set out a framework for testing that exposure on October 21, before the decision.
What to watch before December 9
The Bank's next decision is December 9, and it said it will decide one meeting at a time.[1][8] Before then, four releases will say more about southwestern Ontario than the rate itself:
- Statistics Canada's October Labour Force Survey in early November, for the first local read on the new tariffs in London and Windsor employment.
- The October CPI, especially the shelter and rent components the Bank expects to diverge.
- The next Rentals.ca and Urbanation report, to see whether Windsor's double-digit decline in one-bedroom asking rents is stabilizing or spreading to other unit types.
- The Bank's summary of Governing Council deliberations, normally released about two weeks after a decision, which will show how close the vote between holding and hiking was.
A quarter point on its own does not change the case for a well-financed rental building in southwestern Ontario. What the October report changes is the operating outlook. Expenses are projected to rise faster than rents, and the local job market carries more of the risk. For owners and investors, the costs and the tenants' incomes are where the attention should go.
This article is for information only and is not investment, legal or financial advice.
Sources
[1] Bank of Canada raises the policy rate by 25 basis points to 2½%, Bank of Canada press release (Oct. 28, 2026): https://www.bankofcanada.ca/2026/10/fad-press-release-2026-10-28/
[2] Monetary Policy Report, October 2026, Bank of Canada (Oct. 28, 2026), Overview, Current conditions, Tariff and other assumptions, Outlook and In focus sections: https://www.bankofcanada.ca/publications/mpr/mpr-2026-10-28/
[3] Higher mortgage costs set to depress already 'bleak' housing market, CBC News (Oct. 28, 2026): https://www.cbc.ca/news/business/bank-of-canada-hike-mortgage-housing-market-9.7400127
[4] Bank of Canada Valet, 5-year Government of Canada benchmark bond yield (BD.CDN.5YR.DQ.YLD), daily data to Oct. 27, 2026: https://www.bankofcanada.ca/valet/observations/BD.CDN.5YR.DQ.YLD
[5] National Rent Report, October 2026 (September data), Rentals.ca and Urbanation: https://rentals.ca/national-rent-report
[6] Residential rent increases, Government of Ontario (2027 guideline): https://www.ontario.ca/page/residential-rent-increases
[7] Labour Force Survey, September 2026, Table 7: Labour force characteristics by census metropolitan area, Statistics Canada (Oct. 9, 2026): https://www150.statcan.gc.ca/n1/daily-quotidien/261009/t007a-eng.htm
[8] Policy interest rate and 2026 announcement schedule, Bank of Canada: https://www.bankofcanada.ca/core-functions/monetary-policy/key-interest-rate/