The short version
- A HELOC is normally priced off prime, so a change usually shows up in the next interest charge rather than at renewal.
- A quarter-point (0.25%) change adds about $20.83 per month in interest for every $100,000 drawn. That is arithmetic, not a quote.
- Many HELOCs ask only for interest, so the balance does not fall unless you pay more than the minimum.
- The Bank said more increases could be needed, so the useful number to know is your drawn balance, not only your limit.
What changed on October 28
The Bank of Canada raised its overnight target by 0.25 percentage points to 2.5% on October 28, the first increase in more than three years, according to Bloomberg. It said there could be a need to increase further, while proceeding carefully.
Prime is set by each lender, but the Bank of Canada's published series for prime stood at 4.70% on October 29, up a quarter point with the target. A HELOC is typically priced at prime plus a premium that the lender sets when the line opens. Check your own agreement for the exact wording.
The arithmetic on a drawn balance
A HELOC charges interest on what you have drawn, not on the limit. Variable lines are usually calculated monthly, so the quick check is simple: balance times the change, divided by twelve.
- $50,000 drawn: $50,000 × 0.25% ÷ 12 = about $10.42 more per month.
- $100,000 drawn: about $20.83 more per month.
- $200,000 drawn: about $41.67 more per month.
The same rule works in reverse. If you pay the balance down by $20,000, the monthly interest on the line falls by about $4.17 per quarter point, at the same assumed terms. The point of the arithmetic is to make the cost visible so you can decide, not to suggest any one choice.
Here is a full example with an assumed premium of half a point over prime. Before the change the line would charge 4.95% (4.45% plus 0.50%). After, it charges 5.20%. On an $80,000 balance, interest only, that moves the monthly charge from $330.00 to $346.67, a difference of $16.67. These are illustration figures, not offers from any lender.
Why the balance does not fall by itself
Most HELOCs let you pay only the interest each month. That keeps the payment low, but it also means the balance stays where it is. We covered this in detail in HELOC minimum payments: why the balance never moves. When the cost of borrowing rises, an unchanged balance simply costs more.
- Find out whether your minimum is interest only or includes principal.
- Decide on a fixed monthly amount above the minimum, so your payment does not depend on the latest interest figure.
- Keep a note of what each draw is for. A line used for a renovation is a different decision from one used to carry a monthly shortfall.
Limits and your next application
A standalone HELOC is capped at 65% of the home's value, and a combined mortgage and HELOC at 80%, as we set out in our comparison of home equity limits. For qualifying, lenders commonly look at your obligations, including the line, and many assess the limit rather than only the drawn amount. Policies vary, so ask before you apply for a mortgage or a renewal elsewhere.
Fixed-term sections and the line itself
Some lenders let you convert part of a HELOC into a fixed-term loan. That can steady the payment on a balance you plan to carry for years, but it usually comes with its own term, its own prepayment rules and a price set when you convert. It is a trade between certainty and flexibility, and the right answer depends on how long you expect to carry the balance.
If your plan is to repay within a year or two, the line's flexibility may be worth more than a fixed section. If you expect to carry the balance for longer, ask for the converted terms in writing and compare the total cost over your expected holding period, not just the first payment.
If your HELOC sits beside a mortgage
Some readvanceable plans combine a mortgage and a HELOC that share one registered amount. The line then moves with prime while the mortgage portion follows its own terms. Our RateShield Advance page explains one way to structure that, and a broker can show how your plan behaves if costs keep moving.
A five-minute checklist
- Write down your drawn balance and your limit.
- Find the premium over prime in your agreement.
- Multiply the drawn balance by 0.25% and divide by 12 for the monthly effect of one quarter point.
- Ask whether paying down part of the line makes sense before your next large expense.
- If the line is large, book a review before you need the credit.
Nearly thirty years in Canadian financial services, based in Waterloo Region and working across Ontario. Most people are handed a product — you deserve a plan.
Everything here is illustrative and subject to lender approval and final terms. Figures are examples built on stated assumptions, not quotes, and lender policies differ.
Sources: Bank of Canada — Policy decision, 28 October 2026 · Bloomberg via CMT — Bank of Canada hikes to 2.5%, says more could be needed · Bank of Canada — Valet series for prime (V80691311)