Reactions flood in as BoC announces latest rate call

The Bank of Canada’s decision to leave its overnight rate at 2.25% kept borrowing costs unchanged, but not the pressure facing borrowers heading into a heavy renewal cycle. The hold follows a year‑over‑year uptick in inflation to 2.4% and an unemployment rate that climbed to 6.8% in December.

Analysts across the mortgage industry said the pause entrenched a buyers’ market in many regions while underlining renewed focus on debt service and job security.

Buyers’ market deepens as competition rose

“While this rate hold provides some stability, other factors such as economic uncertainty, potential job loss and affordability are continuing to put downward pressure on the housing market,” Victor Tran, mortgage and real estate expert at Rates.ca, said.

“The housing market is currently very much in buyers’ favor. Motivated sellers should be aware of the increased competition and price accordingly.”

Tran said renewal and refinancing volumes rise as purchase activity cools.

“Even as the market slows, renewal activity is increasing, with homeowners searching for more competitive rates or exploring options such as extended amortizations to keep monthly mortgage payment costs in check,” he said.

According to Rates.ca’s mortgage quoter, renewal quotes as a share of total quotes rose by 16 percentage points year over year in December 2025, underscoring how borrowers shifted from buying to defending their existing positions. 

Fixed, variable and the renewal crunch

Recent bond‑yield volatility and lender competition for renewals meant some pricing pockets improved despite the hold.

“Recently there have been some decreases on three‑year fixed rates, making them competitive with five‑year fixed rates,” Tran said.

“While a three-year fixed rate sets up a homeowner to take advantage of a potentially lower interest rate environment in several years, it also can keep prepayment penalties in check if the homeowner decides to sell within the three-year term.”

Licensed mortgage broker and LowestRates.ca expert Leah Zlatkin said the pause left affordability “essentially unchanged” but gave borrowers clearer sightlines.

“Affordability stays essentially unchanged with today’s hold, and that stability is important for buyers who have been waiting for clearer signals,” Zlatkin said.

“Rates are expected to remain relatively steady in the near term, which gives buyers clearer direction after months of uncertainty.”

She pointed to a growing gap between borrower perceptions and how mortgage pricing actually works.

“Some buyers and homeowners are still waiting for the right moment, in part because there’s confusion about what Bank of Canada decisions actually influence,” Zlatkin said.

“Fixed mortgage rates are driven by the bond market, not the policy rate, and those have already moved higher. At this point, waiting for a meaningfully lower fixed rate is unlikely to deliver the savings many people are hoping for.”

Renewals, job risk and borrower psychology

Bank of Canada research indicated that about 60% of mortgages renewing in 2025 and 2026 are still expected to face higher payments, even after substantial rate cuts from mid‑2024 peaks, with average increases of around 10% for 2025 renewals and 6% for those in 2026. 

Refinancing emerged as another safety valve. “Homeowners that are looking into refinancing are interested in consolidating debt and freeing up liquidity to ride out today’s challenging times,” Tran said.

Yet he warned that falling prices could limit how much equity borrowers could tap.

The maximum conventional refinance remains capped at 80% of appraised value, less registered loans, meaning any price decline directly erodes accessible equity. 

Zlatkin said more borrowers use the current pause to renegotiate, extend terms or reconsider product mix rather than to rush into new purchases.

“We’re seeing fewer new purchase applications, alongside increased activity tied to renewals and refinancing,” she said.

“With fewer buyers competing for listings, softer pricing in some markets, and higher inventory, prepared buyers are finding more room to negotiate.”

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BoC preview: January decision unlikely to stir a housing market revival

With the Bank of Canada readying its first interest rate announcement of the year on Wednesday (January 28), few in the mortgage industry are expecting a cut to help jolt the housing market back into life.

It’s widely thought the central bank will keep its benchmark rate – which directly influences variable mortgage rates and home equity lines of credit (HELOCs) – unchanged, holding steady as it waits to see how the economy fares in the opening months of 2026.

Next BoC change ‘more likely to be a hike’

Inflation came in hotter in December than 12 months before, jumping to 2.4% and essentially nixing any faint hopes the Bank might be tempted to cut rates this month.

And some experts believe that while the central bank is likely to stay on pause for the foreseeable future, a hike appears more plausible than a cut as its next move.

Royal Bank of Canada (RBC) senior economist Claire Fan sees the Bank holding its policy rate steady at 2.25% throughout this year, with “the next change in interest rates… more likely to be a hike.”

That means homebuyers holding out for lower rates on the variable side this year aren’t set for significant relief – and fixed rates mightn’t see meaningful movement either. Five-year Government of Canada bond yields, which lead fixed rates, have slipped since December but are still hovering well above where they lay in late October.

The mortgage industry shouldn’t be counting on rate cuts to spur a housing market revival anytime soon, according to Ownright co-founder and chief operating officer Joel Fox (pictured top).

He told Canadian Mortgage Professional that the current rate environment and ongoing geopolitical unrest were likely to keep market activity muted as buyers grapple with economic uncertainty.

“We have pretty strong indications that rates aren’t going to drop much further in the near term and if anything, I think the worry is that we might start moving the other direction if things continue the way that they are in terms of the unpredictability of the world,” he said.

“And then I think you just layer on the kind of constant state of anxiety that we as Canadians are feeling right now and it’s going to be hard to want to make a move there.”

Latest Trump threats cast housing outlook into fresh doubt

At the weekend, US president Donald Trump ramped up tariff threats on Canada, vowing to put a 100% levy in place on Canadian imports across the border if Mark Carney struck a trade deal with China.

Bank of Canada governor Tiff Macklem seems likely to reference the ongoing trade turmoil in tomorrow’s statement accompanying the rate announcement, and it remains to be seen whether an aggressive US approach toward Canada this year will change the central bank’s approach to interest rates.

Still, the lingering threat of US tariffs and fears of big job losses as a result were two of the main reasons Canada’s housing market remained muted throughout 2025.

Fox said that uncertainty looks set to spill over into this year, although a certain cohort of buyers will probably remain active in the market: those who need, rather than want, to move.

While those Canadians will probably make less than they might have before on the sale of their home because of the cooler overall market, they should also face a better purchase environment, he highlighted.

“I think the group of people that’s going to be least impacted by this is those that are looking to sell and buy within the same market,” he said.

“As long as you’re looking to do both transactions within the same time horizon and in the same market, whatever you lose on the sale, you’ll hopefully gain on the buy so you can come out even there.”

And as always, there’s likely to be plenty of clamour to purchase among first-time homebuyers hoping to leave the rental market and get their foot on the housing ladder.

“I think first-time homebuyers might be the ones that are most likely to jump off the sidelines sooner,” he said, “just because there’s probably the anxiety about getting their foot in the door in the market and the desire to start building up equity.”

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Crisis after crisis hits Toronto condo market as sales slump to multi-decade low

If housing market watchers needed any further proof that 2025 was a wretched year for Toronto’s condo sector, a report last week showed that new condo sales in the Greater Toronto Area (GTA) and Hamilton plummeted to a 34-year low.

Just 1,599 new condos were sold across the region in 2025, according to Urbanation, a stunning 95% drop from their 2021 peak.

Mortgage professionals are already well aware of the crisis that’s besieged Toronto’s once-thriving condo market: floods of investors who bought a preconstruction condo in recent years are now confronted with the prospect of big losses on the purchase thanks to higher interest rates, plunging rents, and much lower rental demand for smaller condos.

With prices also sinking, plenty of buyers are also facing an appraisal crisis, suddenly unable to secure a mortgage for the price they originally agreed to pay for the condo.

And while falling prices and cooling demand have opened the door for some prospective buyers who were previously frozen out of the city’s housing market, observers including the national housing agency have warned that affordability will likely take a further hit in the years ahead because of the slowdown.

That’s because builders and developers are flocking to the sidelines amid the deepening catastrophe. Urbanation said 28 active projects and a total of 7,243 units were axed last year – more than double the number of cancelled units from a year prior.

The real estate agency’s president Shaun Hildebrand said that trend marked “significant cause for concern” for future inventory in a region where Canada Mortgage and Housing Corporation (CMHC) already sees an acute supply shortfall.

Mortgage brokers, too, view the ongoing crisis as bad news for Toronto’s housing inventory down the line. “The valuations are only coming in lower – not higher,” Taz Zaide (pictured below) of 6ix Mortgage Group told Canadian Mortgage Professional. “It’s quite evident now that it’s not rates that are driving the market anymore.

“Obviously, there are other outlying factors, so we’ll definitely see a lot of that still happening on the appraisal side. And if they do stop building, I don’t think it’ll really solve affordability – it’s just going to create the next supply problem.”

Moderating rents cause more headaches for investor buyers

Investors and landlords aren’t likely to see a sharp rebound in rental costs in the city anytime soon, either.

Rent for the average one-bed apartment in Toronto was 6.5% lower in December than the same time the previous year, according to Rentals.ca, while the average two-bedroom rent tumbled by 9.1% over the same period.

That’s good news for hopeful first-time buyers currently renting whose purchasing power has been squeezed over the past decade by soaring rents in the city – and while rental demand in the 416 city centre hasn’t exactly fallen off a cliff, Zaide said it remains “pretty dead” outside that core.

“I think it really depends on what areas you’re looking in,” he said. “If it’s in Toronto, there’s still demand for rent – there are a lot of units that are still up for lease and they go quite quickly.

“But aside from that, outside of the Toronto-centric area, I do find that it’s a bit harder to get the rent, especially to cover some of your borrowing expenses on the property. So people are taking a bit of a hit on that end as well.”

Some buyers opt to abandon units, accepting legal risk

The situation has gotten so dire that for many buyers, the best-case scenario is closing on their purchase and – with no prospect of getting that money back through a quick resale – taking a monthly loss while hoping that demand will eventually rebound.

Others don’t see that as an option and are simply walking away from the deal, leaving tens of thousands of dollars (and potentially more) on the table and accepting the possibility of legal action by the developer.

For those individuals, even being able to secure a mortgage through a private solution often isn’t an appealing outcome, Zaide said.

“[Some clients] would have to go into a private mortgage,” he explained. “While yes, there are options to close your property with other lenders, if you don’t qualify by traditional means – let’s say with an A or B lender – it’s private.

“But then with private, your expenses and carrying costs are so high. You’re talking rates above 7%. So it just doesn’t make sense monthly. You have to look at it realistically if it’s worth it or not, and how much you’re going to be bleeding out every month. And on top of that you’ve got fees as well. It all kind of adds up.”

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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. 

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Condo sales in the GTA and Hamilton just hit a 34-year low

New condo sales in the Greater Toronto and Hamilton Area (GTHA) sank in 2025 to their lowest level since 1991, capping a four‑year correction that has reshaped one of Canada’s most investor‑driven housing markets.

Urbanation reported just 1,599 new condominium apartment sales last year, a 60% drop from 2024 and 95% below 2021 levels.

The slowdown coincided with a record wave of project cancellations. A total of 28 active projects, representing 7,243 units, were scrapped in 2025, more than double the number of cancelled units in 2024 and above the previous peak in 2018.

“As the condo market enters the fifth year of its largest ever correction, the duration of this downturn should be a significant cause for concern as it relates to future supply,” Urbanation president Shaun Hildebrand said.

“By the end of the decade, we know with certainty that there won’t be any new condo completions. What we don’t know is how far into the 2030s the supply crunch will last. If rental construction can’t fill the void, this raises serious questions around the impact on affordability.”

Price correction and investors on the sidelines

Average selling prices in new launches slipped to $1,123 per square foot, an 8% decline from 2024 and an 18% drop from 2022, yet still well above comparable resale units at $856 per square foot in the fourth quarter.

Higher borrowing costs and weaker rents turned pre‑construction condos into a tougher proposition. Many units became a toxic asset with investors no longer able to count on the same demand from renters and many owners bleeding cash because rental income has fallen while mortgage rates rose.

“The rates, at this point, still don’t make sense when you add in the monthly mortgage payment or property tax and throw in the maintenance fees. It’s just not an attractive product,” DLC Clear Trust broker Micky Khaneka told Canadian Mortgage Professional last year.

Shift to completed units, looming supply shock

With investors pulling back, buyers gravitated to projects at occupancy and registration. Urbanation said a record 33% of new condo sales occurred in those stages, up from 9% in 2024 and 2% in 2023, while pre‑construction projects fell below half of total sales for the first time.

Completions remained elevated at 29,291 units in 2025, about 50% above the 10‑year average, even as unsold finished inventory climbed to 3,897 units, more than double a year earlier.

Urbanation also found roughly 10% of pre‑sold condos registered in 2025 were taken back by developers after buyers failed to close, or about 3,000 units.

However, new construction appeared to be stalling. Condo starts fell 63% year over year to 3,272 units and have plunged 88% over three years, pushing total inventory under construction to a 10‑year low of 50,479 units.

Urbanation projects completions would drop 25% in 2026 and again in 2027, and suggested that by 2029 no new condos are expected to be delivered.

Rental boom, policy questions and what comes next

Some cancelled projects shifted to rental: eight developments totaling 2,189 units converted to purpose‑built rentals in 2025, after 1,434 units made the same move the year before.

Purpose‑built rental starts grew 24% to 8,545 units, a multi‑decade high, but analysts warned that may not fully replace lost condo supply.

According to the Housing Supply Report from Canada Mortgage and Housing Corporation (CMHC), a surge in rental construction in the first half of 2025 in cities such as Halifax and Ottawa was not enough to counter a steep drop in condominium construction, especially in Toronto, Vancouver, and Montreal.

Kevin Hughes, CMHC’s deputy chief economist, framed the policy challenge starkly: “I think the challenge here is to have incentives for the private sector to get more involved in rental apartment construction but that those incentives are not [hindering] demand, because that’s the equation that is so difficult to balance right now.”

CMP

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Here's what leading economists say is in store from the BoC in 2026

Chances of a Bank of Canada interest rate cut in the first half of 2026 appear to be fading rapidly, with the C.D. Home Institute's Monetary Policy Council (MPC) recommending that the overnight rate remain at 2.25% throughout January 2027.

The council, which acts as a shadow Governing Council to the Bank, called for the target to remain at 2.25% at the next announcement on January 28 and “maintain it at that level until January 2027.”

It said its recommendation reflected a judgement that “the current stance of monetary policy and the economy were consistent with inflation converging with the 2% target over time.”

Composed of chief economists from the six largest Canadian banks alongside academic and market experts, the MPC provided an “independent assessment of the monetary stance needed to achieve the Bank’s 2% inflation target.”

The body’s chair for this meeting, C.D. Howe president and CEO William B.P. Robson, oversaw votes on the upcoming rate call, the following meeting, and decisions six and 12 months out.

All nine members at the meeting backed holding the overnight rate at 2.25% for both January and March. Eight of nine recommended the same level in July, with one member opting for 2.00%. For January 2027, seven members stayed at 2.25%, one opted for 2.00% and one for 2.75%, underscoring a narrow range of views around a flat path.

MPC members acknowledged “somewhat more robust growth” in the global economy, largely 

from the United States, but pointed to a “loss of growth momentum” in Canada and weakening business investment.

They judged that inflationary pressure was dropping even after a December CPI uptick, and that higher prices for items such as coffee and beef did not threaten progress toward the 2% target. Although only one member voted for an immediate cut, “several felt that the balance of risks tilted in that direction.”

Uncertainty around population estimates, temporary residents and the Canada–US trade relationship remained central to the debate. Still, slower payroll growth, a higher unemployment rate and moderating wage and unit labour cost growth boosted members’ confidence that inflation would continue to ease.

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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!