What the BoC rate hold means for Canada’s housing market

The Bank of Canada’s decision to hold its benchmark interest rate steady on Wednesday came as no surprise to the mortgage industry – and it’s unlikely to move the needle for the national housing market outlook, according to a top economist.

Sal Guatieri (pictured top), senior economist and director at Bank of Montreal (BMO) Capital Markets, told Canadian Mortgage Professional the outcome was squarely in line with expectations, with the central bank striking a cautious tone amid clear economic risks.

And homeowners and buyers shouldn’t count on much rate relief coming from the Bank in the months ahead, he said.

“The Bank is pretty comfortable holding policy steady,” Guatieri said. “That seems to balance the risks between a weak economy and potential inflation pressures stemming from higher energy costs. So there’s really no indication the Bank is ready to move on interest rates in either direction.”

The good and bad news from the latest BoC announcement

The sluggish Ontario and British Columbia housing markets have weighed on the national outlook in the first half of the year, and the latest BoC hold likely means more of the same, according to Guatieri.

Still, there’s a glimmer of good news: Bank decisionmakers clearly aren’t in any mood to cut rates, but a hike also doesn’t seem to be in the cards.

“Unfortunately, the soft housing markets in Ontario and BC likely will not receive much support from lower borrowing costs anytime soon,” Guatieri said. “But at least there’s some relief for potential buyers and even sellers who want to list their property and get a decent price. There’s no clear signs that borrowing costs will go up anytime soon either.”

The Toronto-area market has recorded three consecutive months of rising home sales, sparking some hope of a market recovery although volumes remain at depressed levels and prices continue to drift lower.

A more sustained recovery isn’t expected until affordability improves further – but Guatieri believes that could begin to take shape towards the end of the year.

“We’re getting closer to more reasonable affordability in the Ontario housing market,” he said. “We’re not quite there yet. So we will probably see continued softness in prices for a little while this year before we start to see a sustained pickup in sales and stabilization in prices.”

Outside Ontario and BC, Guatieri noted, the national housing market appears relatively healthy with sales running close to normals and prices rising modestly across most of the country.

What’s next for the Bank of Canada?

While most industry members viewed a June rate hold as a foregone conclusion, many were closely watching the language of its statement to see if it would give any indication of its next steps.

But the central bank’s statement was largely down the middle, with nothing to suggest it will veer from its current preference to hold rates where they are.

Only a significant deterioration in the national economy, Guatieri said, would raise the prospect of rate cuts – while an inflationary spike would likely increase the odds of a rate hike.

But with the Iran conflict and CUSMA (Canada-US-Mexico Agreement) renegotiations unresolved, BMO still sees a prolonged rate hold as the likeliest BoC strategy for the rest of the year.

“It’s just going to sit on the sidelines for quite some time – to see how the Iran conflict plays out, to see how CUSMA renegotiations play out,” Guatieri said.

Canadian financial markets, unsurprisingly, showed little reaction to Wednesday’s announcement. The Canadian dollar remained largely unmoved, while five-year Government of Canada bond yields – which strongly influence fixed mortgage rates – saw little change.

For now, brokers and borrowers should count on rates holding steady barring dramatic developments in Iran or for the economy, Guatieri said.

“There’s just too much uncertainty now, both about the Iran conflict and trade policies,” he said. “So there’s no reason to make a rash move in either direction on policy rates.”

CMP

We hope you are finding our Blog informative and enjoyable to read while keeping you up to date with the ever changing real estate market. 

Please feel free to contact me via Direct/Text or e-mail at any time and my team will be pleased to assist you, family members and friends with all your real estate needs. Referrals are always welcome and rewarded!

Here's why Canada's housing supply crisis is far worse than the US

A new report from the Canada Mortgage and Housing Corporation (CMHC) has put a hard number on what two decades of regulatory inertia and geographic constraints have cost Canadians, and the comparison with the United States is damning.

Using modelling drawn from Organisation for Economic Co-operation and Development (OECD) research, CMHC chief economist Mathieu Laberge found that Canada's housing stock would be approximately 30% larger today and home prices roughly 10% lower had the country's residential construction industry matched the responsiveness of American builders between 2006 and 2024.

Why Canada can't build at the pace the market demands

Three structural forces explain the gap. First, municipal zoning and land-use rules are far more restrictive in Canada than in many American cities.

In many US metropolitan areas, fewer zoning and land-use constraints make it significantly easier for builders to increase supply when demand rises.

In Canada, tighter regulations, particularly in major urban centres, have slowed development and limited the number of homes built. 

Geography is the second barrier. Cities like Vancouver and Montreal are bounded by mountains and waterways that physically restrict outward expansion, constraints that simply do not exist to the same degree across most US markets.

The third factor is demographic: Canada's comparatively small network of large cities leaves households with fewer comparable alternatives when seeking work, reducing the competitive pressure that, in the US pushes developers to respond quickly when demand spikes. 

The toll of regulatory drag is measurable. A separate CMHC study, published in February 2026, found that when a city's land-use rules become 10% more restrictive, house prices rise by approximately 14%. That's a compounding penalty that has accumulated across two decades of municipal inaction on housing approvals.

Vancouver and Toronto, the country's most constrained markets, recorded rezoning approval rates of just 47%. 

Taxation makes the economics even harder

Regulation is not the only obstacle. Taxation accounts for roughly 36% of the cost of a new home in Canada, with development charges, HST and land-transfer taxes making up the largest share.

University of Ottawa economist Mike Moffatt, described the situation as "a cost-of-delivery crisis," one in which it is "simply too expensive, by policy design, to build homes that middle-class families can afford, even before land and profit are considered."

CIBC deputy chief economist Benjamin Tal has been blunter still. "The market is broken, the market is frozen," he said. "It's too expensive to buy, not expensive enough to build."

The Carney government has pledged a response: Build Canada Homes will deploy approximately $25 billion in public financing for prefab and affordable housing alongside $10 billion in low-rate capital, while a 10-year, $51-billion Build Communities Strong Fund targets roads, water and transit infrastructure. GST relief on new homes under $1 million for first-time buyers is also in place.

CMP

We hope you are finding our Blog informative and enjoyable to read while keeping you up to date with the ever changing real estate market. 

Please feel free to contact me via Direct/Text or e-mail at any time and my team will be pleased to assist you, family members and friends with all your real estate needs. Referrals are always welcome and rewarded!

Bank of Canada urges calm amid Canada's technical recession label

The Bank of Canada moved quickly to temper recession fears on Monday, with senior deputy governor Carolyn Rogers cautioning parliamentary lawmakers against drawing conclusions from two consecutive quarters of economic contraction.

Statistics Canada confirmed on May 29, 2026 that real gross domestic product declined at an annualized rate of 0.1% in the first quarter. That's the second consecutive quarterly contraction after a downwardly revised 1.0% decline in Q4 2025.

By one standard definition, that sequence meets the threshold for a recession. Rogers, however, pushed back firmly on any rush to apply that label in full.

"Two quarters of annualized contraction in GDP does meet one definition of a recession. But simply the fact that you have to put the term 'technical' in front of it sort of tells you that you need to really look past that one indicator," Rogers told the parliamentary committee.

For mortgage brokers navigating a market already shaped by economic anxiety, the Bank's message is timely.

According to the Ownright Operators Report, which surveyed 1,015 real estate professionals across Canada between March 27 and April 29, 2026, 40% of respondents cited broader economic anxiety, including recession fears, as the primary reason buyers and sellers were holding back, outranking interest rates and employment concerns. 

What the data actually shows

The Q1 2026 result fell short of consensus expectations. A surge in imports, roughly half driven by gold purchases, was the primary drag, partially offset by a build-up in business inventories.

Business capital investment fell 0.7%, its fifth consecutive quarterly decline, while investment in residential structures contracted 2.0% and resale housing activity dropped 9.9% during the quarter. 

However, a flash estimate for April, cited by Rogers before the committee, pointed to a 0.4% rebound in industry-based GDP.

"I think we need to be careful not to put too much weight in any one indicator," she said.

Read more: What Canada's GDP miss means for the next BoC rate call

Implications for the June 10 rate decision

Economists have largely avoided applying the recession label in full.

Derek Holt, vice president and head of capital markets economics at Bank of Nova Scotia, wrote in a note to investors that "normally you need an extended period of contraction in readings like jobs and industrial output to call a recession. We don't have that at this point and there is a higher bar to calling recession on these readings than a handful of months."

Sal Guatieri, senior economist and director at BMO Capital Markets, previously told Canadian Mortgage Professional that the Bank of Canada appeared to be "on hold for the foreseeable future," but cautioned: "If the trade war ends up causing further harm to our economy, the Bank may need to cut rates."

Meanwhile, Toronto mortgage broker Drew Donaldson previously noted in CMP that a weaker economy could eventually lead to lower rates and bond yields, potentially supporting housing activity for qualified buyers despite near-term volatility. 

Rogers confirmed the Bank will incorporate both the GDP figures and the forthcoming May labour force survey into its June 10 deliberations, a rate call now carrying considerable weight for brokers advising clients on timing and product selection.

CMP

We hope you are finding our Blog informative and enjoyable to read while keeping you up to date with the ever changing real estate market. 

Please feel free to contact me via Direct/Text or e-mail at any time and my team will be pleased to assist you, family members and friends with all your real estate needs. Referrals are always welcome and rewarded!

What Canada's GDP miss means for the next BoC rate call

Canada slipped into a technical recession in the first quarter of 2026, with Statistics Canada confirming on May 29, 2026 that real gross domestic product contracted at an annualized rate of 0.1%.

The latest figure fell dramatically short of consensus expectations for 1.5% growth and set up a closely watched Bank of Canada rate decision on June 10.

The Q1 decline follows a downwardly revised contraction of 1.0% in Q4 2025, revised lower from the initial estimate of -0.6%. It means the economy has now contracted in three of the last four quarters.

On a year-over-year basis, real GDP was also down 0.1% in the first quarter. 

BMO chief economist Douglas Porter, writing in a research note released Friday, described the result plainly: "There's no sense sugar-coating this sour result, as the economy has clearly been struggling to grow since the start of the trade war."

The Q1 weakness was driven primarily by a surprise 2.4% decline in government spending, which provided a consistent floor under growth in prior quarters, alongside a 3.2% contraction in business investment — its fifth straight quarterly fall — and a near-8% drop in residential investment.

Consumer spending held up at 1.5%, though Porter noted this segment "is now dealing with the energy shock."

What the data means for rate policy

On the rate outlook, Canada's major bank economists broadly align on a June 10 hold.

Andrew Hencic, director and senior economist at TD Economics, argued in a May 29, 2026 research note that the headline miss likely overstates the true weakness.

"The disappointing first quarter figure likely overstates the weakness in the economy as net trade remains noisy and materially subtracted from first quarter growth," Hencic wrote.

He pointed to a strong April flash estimate, a projected 0.4% monthly rebound, as evidence that Q2 should see a bounce-back.

His conclusion was direct: "Our view remains that as the economy continues to operate below capacity, and if the inflation shock fades, the Bank of Canada will remain on the sidelines."

CIBC economist Katherine Judge echoed that view, concluding that the positive momentum implied by the April reading would keep the Governing Council on hold. 

Porter was equally direct on rate-hike talk: the economy, he argued, "is in no condition to deal with higher rates." 

A bounce-back that depends on trade

The Q2 outlook hinges on forces largely outside the Bank's control. Porter acknowledged that a trade deal or lower energy prices would support a rebound, but cautioned that "we can't necessarily rely on either just yet."

Exports fell 4.1% year-over-year, a direct casualty of United States tariff pressure, while business investment continued its retreat as firms held back capital spending pending greater clarity on the trade relationship.

CMP

We hope you are finding our Blog informative and enjoyable to read while keeping you up to date with the ever changing real estate market. 

Please feel free to contact me via Direct/Text or e-mail at any time and my team will be pleased to assist you, family members and friends with all your real estate needs. Referrals are always welcome and rewarded!

What the new Fed chair means for Canada

Kevin Warsh was sworn in as the 11th chair of the Federal Reserve on May 22, 2026, replacing Jerome Powell after an eight-year tenure.

For Canadian mortgage brokers, the leadership change carries real implications, even though the Fed sets no policy in Ottawa.

The Fed's approach to interest rates directly influences US Treasury yields, which in turn shape Government of Canada bond yields and, by extension, Canadian fixed mortgage rates.

That transmission channel makes Warsh's every move relevant to brokers advising clients on rate-sensitive decisions here at home.

What kind of Fed chair will Warsh be?

Warsh was viewed by some observers as a surprisingly hawkish pick, having repeatedly highlighted the inflation risks posed by lower interest rates, yet Trump will likely still expect his new chair to pursue rate cuts, potentially complicating the outlook for the Bank of Canada. 

Odeta Kushi, deputy chief economist at First American, told Mortgage Professional America that leadership changes are unlikely to materially alter the Fed's policy direction overnight.

"Although the chair influences communication and risk framing, policy is ultimately set by a committee where the chair holds just one vote," she said. 

Doug Porter, chief economist at Bank of Montreal (BMO) in Toronto, made a similar point when speaking to Canadian Mortgage Professional earlier this year.

"What I find interesting is that financial markets, which know darn well what's going on here, are really not pricing in anything unusual for the rest of the year," he said. 

"So despite all the noise around the Fed, the market’s still pretty comfortable that nothing really unusual is going to transpire for US interest rates this year, because I think the view is that the governance structures there will not allow a new Fed chair to just rule the roost and do whatever they want."

What this means for Canadian fixed mortgage rates

For the millions of Canadians navigating the mortgage market in 2026, conditions remain difficult.

Five-year bond yields have risen by 0.35 to 0.40 percentage points since the Iran conflict began, and most forecasts now place bond yields in the 3.0% to 3.5% range through 2026, with an upward bias. 

Read more: Bond yields hit their highest level this year

A large divergence between Fed and Bank of Canada policy could also put pressure on the loonie — something brokers should monitor closely when advising clients locked into or considering variable-rate products. \

The Bank of Canada held its overnight rate at 2.25% at its April 29, 2026 rate announcement, with its next decision scheduled for June 10, 2026.

The broker's bottom line

Brokers should resist framing the Warsh appointment as an automatic tailwind for lower rates.

While Warsh is seen as more willing to cut rates than Powell, major economic obstacles — including 3.8% US inflation, elevated energy prices, tariffs, and resistance from other FOMC members — make a quick reduction in mortgage rates unlikely, with most analysts suggesting rate drops won't materialise until late 2026 or 2027 at the earliest. 

For clients navigating renewal decisions in a high-rate environment, the Warsh era is one of watchful waiting, not yet a reason to lock in, hold off, or pivot strategy.

CMP

We hope you are finding our Blog informative and enjoyable to read while keeping you up to date with the ever changing real estate market. 

Please feel free to contact me via Direct/Text or e-mail at any time and my team will be pleased to assist you, family members and friends with all your real estate needs. Referrals are always welcome and rewarded!