Why buyer nerves, not rates, are holding Canada's housing recovery back

With the Bank of Canada holding its policy rate at 2.25%, many market watchers expect steady borrowing costs to calm the housing market heading into 2026.

Still, industry forecasts point to only modest price growth and a “reset” year rather than a sharp rebound, even as major brokerages describe conditions as improving but fragile.

Joel Fox, chief operating officer of digital real estate platform Ownright, argued that the real drag on activity has less to do with borrowing costs and more to do with psychology.

In his view, confidence, clarity and emotional risk are now doing more to shape buyer behaviour than posted mortgage rates.

Recent internal Ownright survey data of 250 Ontario homebuyers indicated that 97% felt financially ready to buy, but nearly half reported that the process became confusing or stressful once they encountered the fine print.

“A rate hold confirms what we’ve been seeing for months: interest rates aren’t the barrier anymore. Prices have already come down from their peaks, but buyers remain cautious because they’re unsure about the long-term value of their purchase. People worry more about overpaying or losing equity than they do about an extra few dollars on monthly interest,” Fox said.

“Realtors and lenders are entering a new phase where the non-financial side of homebuying matters more than the price tag. Buyers want transparency, clear communication, realistic valuations, and guidance that helps them understand the risks, not just the costs. And with AI tools giving consumers more information than ever, the industry can’t rely on old assumptions about what buyers will accept,” he said.

Fox said that emotional risk has increasingly outweighed pure affordability concerns: buyers fear locking into properties that might lose value, even as many believe that current prices are below peak levels.

He said AI-driven valuations and richer data on neighbourhood trends have trained borrowers to scrutinize comps, price cuts and days-on-market far more closely than in the last cycle. 

Meanwhile, BMO chief economist Doug Porter describes a 2026 rate hike as a “distant prospect,” while suggesting that a steady overnight rate could give buyers more certainty about future costs.

Royal LePage and REMAX Canada both project only moderate national price growth, with more balanced conditions rather than a renewed frenzy.

At the same time, some rate forecasts suggested that the Bank of Canada has moved to the lower end of its neutral range, reinforcing the sense that policymakers are now in “wait and see” territory.

Fox said the industry’s next challenge lies less in product design and more in communication. He pointed to situations where pre-approvals, conditional offers and closing costs diverge from buyers’ expectations, eroding trust even when payments remain manageable.

“Heading into 2026, trust is going to drive the recovery. Rates may be stable, but confidence isn’t, and until the industry rebuilds it, we shouldn’t expect major movement in the market,” Fox said.

CMP

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Mortgage industry, economist reaction pours in as BoC reveals latest decision

The Bank of Canada’s decision to hold its overnight rate at 2.25% leaves the mortgage industry focused less on surprise and more on what comes next for strained borrowers and a cooling housing market.

Analysts have widely expected a pause after a stronger‑than‑anticipated November jobs report and a 25‑basis‑point cut in October.

The hold reinforces the Bank’s recent pause‑and‑assess stance as inflation eased from September’s 2.4% pace to 2.2% in October.

CIBC economist Katherine Judge highlights the Bank’s resistance to reading too much into recent upside surprises.

“Policymakers played down recent upside surprises in data, pointing to only some signs of improvement in the labour market, with trade-sensitive sectors still weak and hiring intentions muted, and citing that final domestic demand was flat in Q3, with the headline reading driven by volatility in trade,” Judge wrote.

She added that such “comments that push back on recent upside surprises in the data seem to suggest that the risks ahead would be to the downside, and that resulted in bond yields easing off.” CIBC now expects the policy rate to remain on hold through 2026.

For TD Economics, the message is continuity rather than surprise.

“Dismissing the economy’s resilience would be a mistake, however, the outlook remains challenging and the risks from trade uncertainty remain high,” said Andrew Hencic, director and senior economist at TD Economics.

He noted that a sequence of strong employment reports has pushed markets to reprice the risk of future hikes, but not enough to shift the near‑term path.

“The hold here was widely expected, and we maintain the view that the balance of risks to the outlook will have the Bank on hold in the coming months,” Hencic said.

With CUSMA renewal talks set to intensify and key indicators still clouded by tariff impacts, he added that TD expects the Bank to stick to a “data dependent approach” as it weighs any further moves.

Housing market stability, not a spark

“This rate hold comes as the housing market enters what is traditionally one of the slowest times of year,” said Victor Tran, mortgage and real estate expert at Rates.ca.

“The hold provides some stability, but it’s not likely to spur a significant increase in sales activity during the holiday season. We may see some pickup early next year, if homebuyers feel confident enough to step off the sidelines. But buyer confidence depends on more than just mortgage rates. Inflation, affordability and broader economic health are all factors that potential homebuyers are likely to take into account in their purchase decisions, in addition to potential job loss and other personal life events.”

While the hold anchors variable mortgage rates, a recent 20‑basis‑point rise in bond yields has already pushed some fixed rates higher, with more lenders expected to follow. That dynamic weighs on would‑be buyers and owners facing renewal.

According to the Bank of Canada, roughly two thirds of borrowers renewing in 2026 are expected to see payments increase, with average hikes near 20% and around 10% facing jumps above 40%. 

Fixed vs. variable and the renewal crunch

“Affordability stays exactly where it is with today’s hold, and that consistency is meaningful for buyers,” said Leah Zlatkin, licensed mortgage broker and LowestRates.ca expert.

“Many who’ve been waiting for clearer direction see a hold as confirmation that we’re at the bottom of the rate cycle. That sense of predictability often encourages buyers to act before spring competition picks up.”

“Five‑year bond yields have climbed in recent weeks,” Zlatkin said. “That movement is pushing fixed rates higher, and in the last four days we’ve seen promotional specials disappear as lenders reprice.”

Variable rates, she added, remain cheaper than comparable fixed products, but she cautioned that they “may not fall much further, and over the next five years they could rise above today’s fixed rates.”

Commercial outlook and longer‑term risks

On the commercial side, Avison Young’s Canada president, Mark Fieder, said the hold has been widely anticipated and signalled a prolonged pause “barring any developments warranting a cut.”

Lower rates, he said, would be “preferred for commercial real estate, stimulating investment opportunities for those who have been on the sidelines as well as those who have already been actively investing in sectors like multifamily, industrial, and retail.”

Many fixed‑rate borrowers are bracing for a “shock” at renewal as they rolled into higher rates, with analysts warning that payment increases in the coming years could be substantial yet still manageable for most owners in the absence of a severe downturn.

Royal LePage president and CEO Phil Soper framed the rate backdrop as no longer the chief headwind. “Mortgage rates are no longer the villain in this story. Borrowing costs have stabilized at a level that supports healthy market activity. Buyers can move forward without worrying they are missing out on cheaper money tomorrow. That clarity alone will unlock demand,” he said in the company’s 2026 Market Survey Forecast.

For brokers and lenders, rates have steadied, but fixed costs are creeping up and a renewal wave is still coming. Clear guidance on terms, amortization and refinancing remain crucial to help borrowers stay on track.

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 delivers final rate decision of 2025

The Bank of Canada has left interest rates unchanged in its last decision of the year, holding the policy rate steady amid lingering uncertainty over inflation and the economic outlook.

The central bank said on Wednesday morning it was keeping the benchmark rate – which leads variable rates and home equity lines of credit (HELOCs) in Canada – at its current level of 2.25%, hitting pause on cuts in a decision that had been widely anticipated by financial markets.

It said it views the current policy rate as "at about the right level" to keep inflation concerns in check and manage the economy through its current challenges, suggesting that interest rate cuts in early 2026 could be off the table. 

The announcement means the Bank rounds off 2025 with its policy rate a full percentage point lower than where it sat at the end of last year, following four 25-basis-point cuts. 

No surprise for markets as BoC opts for a hold

After its last decision – a quarter-point cut on October 29 – the central bank’s governor Tiff Macklem hinted that a rate hold was its likely next step.

And a surprisingly strong jobs report for November appeared to rubber-stamp that decision, with the economy adding about 54,000 jobs last month as unemployment slipped to 6.5%.

Those numbers outstripped economists’ expectations, even though part-time work contributed to most of November’s labour market gains, and Royal Bank of Canada (RBC) assistant chief economist Nathan Janzen said in the wake of that announcement a BoC hold was now even more likely than before.

Even with the Federal Reserve poised to cut later today in the US, Bank of Montreal (BMO) chief economist Doug Porter signalled last week that the Canadian central bank was unlikely to bring rates lower.

“After leading the world on the way down in 2024, and following up with 100 bps of cuts this year, it increasingly appears that the Bank of Canada is now done,” Porter wrote.

“While the BoC leaned that way after its prior decision in October, the run of data since then has been so firmly planted on the strong side that market chatter is now that the next move could be a hike (albeit well down the road).” 

Resilient economy strengthened case for BoC pause

Analysts have also highlighted a Canadian economy that appears to be strengthening after absorbing the initial shock of US president Donald Trump’s tariff regime, launched earlier this year.

In the third quarter, Canada’s gross domestic product (GDP) posted a surprising jump, rising by 2.6% and defying predictions from earlier in the year that the economy would buckle under the weight of those Trump tariffs.

The Bank’s first decision of 2026 will arrive on January 28, followed by seven subsequent rate announcements: on March 18, April 29, June 10, July 15, September 2, October 28, and December 9.

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!

CMHC warns soaring development charges are reshaping Canada’s housing costs

Canada’s housing file has already been under pressure from rates, construction costs and zoning. Now new numbers from Canada Mortgage and Housing Corporation (CMHC) put a sharper price tag on another piece of the puzzle – the development charges that cities levied on every new unit.

The federal housing agency’s latest data set, drawn from 30 municipalities in Ontario, British Columbia, Alberta and Quebec, showed those fees accounted for a material share of new-home prices and varied widely from one market to another.

In Ontario alone, CMHC found development charges could represent 8 to 16% of a new condo price and up to 9% of the cost of a single-detached home in Toronto.

“New data collected by CMHC shows development charges account for a significant part of the cost of a new housing unit in some cities,” said Mathieu Laberge, CMHC’s chief economist and senior vice-president of housing insights.

"Charges vary greatly across the country both in their magnitude and on how they are charged."

He added that “understanding development charges is key to understanding housing supply and affordability across Canada. They shape both the cost of housing and the pace at which communities can grow, while being an important funding source for a broad range of municipal infrastructure.”

For a two-bedroom apartment, CMHC’s pilot data showed per-unit charges of about $39,600 in Ottawa and $121,500 in Markham, equal to 8.2% and 15.7% of average new condo prices in those markets.

In the Greater Toronto Area, charges on a single-detached home ranged from roughly $125,000 in Pickering to about $180,600 in Toronto, or close to 9% of the average absorbed price, CMHC found.

Municipal revenue needs vs affordability goals

Builders and brokers push back on cumulative “cost‑to‑build” pressures. Rising land, labour and material costs in Ontario have been “compounded by high municipal development charges,” contributing to stalled projects and weaker housing starts.

Industry groups also warn homebuyers are “still bearing the burden of soaring development fees,” with the Ontario Real Estate Association estimating that on average, development charges could add “up to $135,000 to the cost of a new home” in some markets. 

The association has proposed alternative models for funding growth. One idea is to let municipalities treat water and wastewater services similarly to energy services – amortized across the broader user base, rather than front-loaded into development charges.

The group is calling for pro-housing policies that meet municipalities' infrastructure needs without pushing costs onto future homeowners. It also encourages the government of Ontario to implement solutions that help “get shovels in the ground.”

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!

Toronto's condo market crisis worsened in November

Condo buyers sat out Toronto’s market in November, deepening a downturn that has already rattled investors and developers.

Sales in the 416 core fell 21.8% year over year to 880 units, while transactions in the surrounding 905 dropped 21.4% to 419. That total of 1,299 condo sales was 21.7% lower than a year earlier.

Average prices also slipped, down 1.7% in the 416 to $701,259 and 8.7% in the 905 to $583,578, for a GTA-wide condo average of $663,290 – 3.8% below last November.

The weakness came against a broader slowdown. Across all home types in November, GTA sales fell 15.8% year over year and the average selling price dropped 6.4%, according to the Toronto Regional Real Estate Board.

Condo sentiment turned sharply negative

The data reflects a deeper reset in how Canadians view the condo asset class. Thirty-five percent now believe condos are no longer a good investment, up five percentage points from March 2025, according to a Leger survey commissioned by Rates.ca.

Only 17% said condos had always been a good investment, down from 22% earlier in the year.

“Investor appetite has diminished in the current economic environment, leaving demand primarily driven by owner-occupants who typically seek larger, more functional spaces than smaller condos provide,” said Steven Yanni, managing broker at HouseSigma.

Younger buyers, though, view the same conditions as an opportunity. Among Canadians under 35, 39% said they would consider purchasing a condo, compared with 27% of those over 35, the survey found.

A fragile opening for first-time buyers

“First-time homebuyers have more choices, stronger negotiating leverage, and improved affordability after multiple Bank of Canada rate cuts,” said Clara Leung, real estate broker and mortgage agent at Swivel Mortgages.

“Many are using this window to get into the market and to build equity.”

New federal rules that raised the insured mortgage cap to $1.5 million and extended amortizations to 30 years for new builds, along with Ontario’s 8% HST rebate on homes under $1 million, are touted by brokers as potentially delivering more than $130,000 in combined savings for some borrowers.

Still, affordability remains a stumbling block even as prices fell. “I feel like affordability still seemed to be a lot of concern for the first-time homebuyers,” DLC Clear Trust mortgage broker Micky Khaneka told Canadian Mortgage Professional.

“Even with lower rates, for the people who were most interested, unfortunately when you threw the stress test on there, there was still a relatively high payment. Especially if it was a single individual earning an average salary of $60,000 to $80,000 or $90,000,” he said.

Small “dog crate” units bore the brunt

Khaneka said many investors have been left with cramped, hotel‑sized studios that today’s renters no longer wanted. Those units, he added, are “just not rentable” except to a narrow slice of single professionals, leaving “an oversupply of a specific type of units downtown.”

Toronto’s condo slump has been described a “perfect implosion” in the small‑unit segment, with investors unable to close as appraisals came in below preconstruction purchase prices and rents slipped.

Canada Mortgage and Housing Corporation’s deputy chief economist, Aled ab Iorwerth, recently told CMP he was watching Toronto closely but did not yet see delinquencies at crisis levels, even as they climbed to their highest point since 2012.

He warned that plunging apartment starts could leave the city “back in a shortage” three or four years from now as today’s projects are completed and little new product replaces them.

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!