The Bank of Canada has maintained its interest rates since July 2023. Despite expectations for another hold next week, a growing number of economists and traders anticipate a rate increase to combat persistent inflation. Experts in mortgages and debt warn that higher rates could significantly impact Canada’s struggling real estate market. Variable-rate mortgage payments and new fixed mortgage rates would rise, reducing the pool of eligible buyers and potentially lowering home prices.
Scott Terrio, consumer insolvency manager at Hoyes Michalos & Associates in Ontario, likened rising rates to compounding challenges for the housing market and emphasized the potential widespread effects.
With the national home sales volume at a 25-year low, Ben Rabidoux from Edge Realty Analytics noted a lack of buyer confidence due to economic uncertainties like the Canada-U.S. trade war and the impact of AI on jobs. Rabidoux suggested the possibility of a gradual decline in home prices over the next few months if interest rates increase.
The Canadian Real Estate Association recently adjusted its 2026 sales forecast downward for the third consecutive quarter, attributing it to a more hawkish stance from the Bank of Canada. Governor Tiff Macklem indicated a possible need for higher borrowing costs if energy prices remain elevated due to ongoing global conflicts affecting energy markets.
While a Bloomberg survey suggests a rate hold is likely, some major financial institutions have shifted their predictions to expect a rate hike. Market data indicates a rising probability of a rate increase, with various experts like Derek Holt from Scotiabank and David Doyle from Macquarie Group supporting the notion of a rate hike in the near future.
Leah Zlatkin, a licensed mortgage broker, echoed the sentiment that a rate hike could mark the beginning of a rate cycle. She pointed to a recent price drop in the Greater Toronto Area as an opportunity for prospective buyers, emphasizing the importance of securing property before potential future rate hikes.