Staff paper details how the central bank's forecasts will track borrowers renewing at higher rates
The Bank of Canada has started building its economic forecasts on a new model that gives mortgage renewals and housing supply a much bigger role in how the central bank reads inflation. The change brings Canada's renewal wave closer to the centre of rate-setting.
The model, called Prima, entered use in September, according to a Bank of Canada staff analytical paper. Governor Tiff Macklem unveiled it in a Sept. 21 speech to the Halifax Partnership and said it will serve as the primary forecasting model for the Oct. 28 rate announcement and Monetary Policy Report.
"No model is going to solve every problem, but we are hopeful that this model will be better suited for a world with more supply shocks and in a more interconnected world," Macklem told reporters after the speech.
Bank of Canada governor Tiff Macklem issued a stark warning Monday that a fresh round of US tariffs and elevated global oil prices risk undoing Canada's hard-won economic recovery.https://t.co/k19n8NXNPd
— Canadian Mortgage Professional Magazine (@CMPmagazine) September 22, 2026
How Prima tracks mortgage renewals
Prima replaces an approach that judged inflation largely through economy-wide supply and demand. It splits households into three groups based on how they spend and borrow.
"Roughly one-third of the households in Prima are current-income households, about half of which are homeowners," wrote authors Don Coletti and Martin Kuncl.
Brokers work with that homeowner group every day. These borrowers have little liquid wealth and substantial mortgage debt.
"Higher interest rates gradually raise mortgage payments as loans renew or refinance, reducing cash available for other spending. Lower house prices also reduce housing equity and borrowing capacity," the paper said.
The model also treats mortgage interest costs as their own component of the consumer price index (CPI), with "changes in market rates passing through gradually as mortgages renew or refinance."
In the Bank's simulation of a 100-basis-point rate hike, "mortgage interest costs rise as higher rates pass through to outstanding debt, while other owned-accommodation costs ease as housing demand and construction cost pressures weaken."
Brokers see that lag every renewal season. A July 2025 Bank of Canada staff note estimated that roughly 60% of borrowers renewing in 2025 and 2026 would see their payments rise, a figure cited in Canadian Mortgage Professional's 2026 Brokers on Lenders ranking of Canada's top lenders.
"Renewals are relationship opportunities, not simply maturity dates," Micky Khaneka, a broker with MKG Mortgages in Toronto, told CMP in September.
What the Bank of Canada's new model means for rates
The policy rate has held at 2.25% since October 2025. As of early September, BMO, CIBC, RBC and TD expected no change through December, while National Bank and Scotiabank forecast an October hike, as outlined in our look at what the Bank of Canada's next decision means for brokers.
Trade adds another variable, with the latest US tariff escalation clouding the Bank of Canada's rate outlook.
Prima will not settle that debate on its own. It also models how population growth "raises demand for shelter services before supply can respond, adding pressure particularly on rental housing." That channel could keep shelter inflation elevated even as other prices cool.
"Prima provides a disciplined baseline, not a mechanical answer," the authors wrote. They added that staff will pair it with judgment and other tools. The paper reflects the authors' views, not official Bank positions.
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