Canadian housing market ‘on its knees’ as odds of Bank of Canada rate hike
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The Bank of Canada has not raised interest rates since July 2023.
And while an eighth-consecutive hold is widely-predicted next week, a growing number of economists and traders are now expecting the central bank to hike its trend-setting rate to tamp down stubborn inflation.
Mortgage and debt experts say higher rates would have significant impacts on Canada’s sagging real estate market. Payments on variable-rate mortgages would rise immediately, along with rates for new fixed mortgages. The pool of eligible buyers would shrink, shifting power from sellers to those who can qualify for the financing needed to make a purchase. Home prices could dip lower.
“The housing market is kind of on its knees right now, and rising rates is like tossing a drowning guy an anchor,” said Scott Terrio, manager of consumer insolvency at Ontario-based Hoyes Michalos & Associates.
He says a hike “would reverberate massively.”
Could an interest rate hike see home prices fall?
The volume of home sales nationwide is currently at a 25-year low, says Ben Rabidoux of Ontario-based Edge Realty Analytics.
He describes confidence among buyers today as “unbelievably weak across the country,” owing to a slew of economic uncertainties ranging from the Canada-U.S. trade war to the impact of AI on jobs.
“The reality is that when we look at per capita home sales, we’re already back to 1990s levels, which [was] a really terrible recessionary environment.”
On home prices, Rabidoux believes “a gradual grind lower over the next three or six months is very plausible” if interest rates start rising.
If you’ve been looking to buy a home in Ontario, you may have seen a few listings where the furniture doesn’t look quite right. That’s because many of them are being staged virtually, using AI. Experts say there are benefits and drawbacks. CBC’s Talia Ricci breaks down what you need to know.
Last week, the Canadian Real Estate Association downgraded its forecast for 2026 home sales activity for a third straight quarter.
The industry group referenced a “notably more hawkish tone from the Bank of Canada,” as it called for 444,530 homes to be sold by year-end, a 5.2 per cent drop from 2025.
The Bank of Canada’s policy rate has stood still at 2.25 per cent since a quarter-point cut in October 2025.
Governor Tiff Macklem has recently warned the bank may need to raise borrowing costs if energy prices remain elevated. On Saturday, he said there is “no resolution in sight for the conflict in the Middle East” that has roiled global energy markets for the past several months.
On Monday, the latest inflation data from Statistics Canada put a spotlight…
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