Old-economy rebound lifts Canada’s growth, buys time for mortgage market

Canadian growth at the start of 2026 turned out stronger than most economists have pencilled in, offering a rare upside surprise just as fresh geopolitical and energy shocks loomed over households and lenders.

Statistics Canada’s latest figures showed real GDP edged up 0.1% in January, with an advance estimate pointing to a 0.2% gain in February.

Douglas Porter, chief economist at BMO, called it “a pleasant surprise, for a change,” noting that the economy appeared “in somewhat better shape than anticipated heading into the turmoil.”

Porter said the real story lay in what he described as a “revenge of the old economy,” with mining and oil and gas output rising 1.2% in January and construction up 1.0% despite “all the dire headlines about residential activity.”

Even with manufacturing tumbling 1.4% month‑over‑month and 4.6% year‑over‑year on extended auto shutdowns, the goods‑producing side still managed to “pound out a 0.2% rise in January,” he said.

Services activity was largely flat as weakness in wholesale trade and transportation offset steadier categories. “Consumers were doing their thing, with retail trade up 0.8% (and a sturdy 2.7% y/y), while hotels & restaurants rose 0.7% (2.3% y/y),” Porter said, adding that “finance & insurance is another strong point at up 0.9% and 3.2% y/y.”

From a year earlier, real GDP in January was only 0.6% higher – a pace Porter characterized as the economy “just keeping its head above water,” even with support from defence spending, infrastructure programs and a 7.3% surge in data‑centre‑related activity.

Bottom line for growth and rates

In his latest outlook, Porter said the one‑two punch of stronger‑than‑expected January and February readings “sets a much better tone to Q1 than anticipated.”

BMO revised its Q1 annualized growth call up to 1.5% (from 0.8%), closer to the Bank of Canada’s January projection of 1.8%.

He cautioned, however, that the recent spike in fuel costs is likely to “weigh on consumer sentiment and take a bite out of spending in the coming months,” with growth seen ebbing to 1.0% in Q2 and about 1.0% for 2026 as a whole.

That modest trajectory broadly aligns with other recent forecasts that have kept mortgage professionals focused on a low‑growth, higher‑for‑longer environment.

Deloitte’s early‑2026 outlook, for example, pointed to a “year of two halves” with subdued momentum early on and a slightly firmer second half, while still trimming its GDP call and emphasizing trade and population‑growth risks for housing and credit demand.

The latest GDP surprise suggests that Canada entered the current oil‑price and geopolitical shock with a bit more forward motion than feared – but not enough to dramatically change the story for mortgage professionals.

For brokers, lenders and investors, early‑year resilience bought the economy time, not a boom, and the mortgage business still needs to plan for a year defined by slow growth, cautious consumers and a rate path that rewards prudence over optimism.

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!

Ontario’s new housing affordability measures: A gamechanger for buyers and builders?

Ontario’s provincial government has rolled out a slew of new measures to tackle the housing crisis over the past week, expanding a HST rebate to all purchases of new homes and slashing development charges in conjunction with the federal government.

But those changes are unlikely to turn around the fortunes of the sagging preconstruction market, according to a Toronto-based mortgage broker who said pricing problems will persist even with the removal of the 13% tax on new homes.

“The problem with pre-con pricing is that even after this new rebate, it’s still priced way higher than resale,” Matthew O’Neil (pictured top) of Connolly Capital told Canadian Mortgage Professional. “If you’re a first-time buyer and you want to buy a condo downtown, why would you buy preconstruction? It makes no sense.

“You’re looking at $1,300, $1,400, $1,500 a square foot – but you can go buy a resale condo for under $1,000 a square foot. Even with the 13% knocked off, it still doesn’t make sense from a pricing standpoint. If you’re an end user, why would you buy pre-con right now?”

The change could be helpful for buyers in a specific circumstance, O’Neil added: if builders are trying to sell off unsold inventory and the deal is going to close in the short term. But for end-user buyers purchasing a condo that’s closing in 2030, he said the price will still be hundreds of dollars higher than what it would cost to buy a resale.

Development charges: Governments bid to slash building costs

The announcement on development charges saw Prime Minister Carney and Premier Ford unveil a cost-match pledge of $8.8 billion over the next decade to reduce those fees by up to 50%, an effort to boost builder confidence and spur faster construction across the province.

Municipalities are also expected to support lower charges, a press release said, to allow all three levels of government to improve supply and affordability.

“Development charges are a major upfront cost that can delay or prevent new housing projects,” the government release said. “Lowering these upfront costs will help accelerate construction and build more homes.”

That marks a new step in Carney’s pledge to increase the pace of homebuilding to half a million units a year, an election promise that resulted in the creation of the Build Canada Homes program.

The end result might make homes more affordable for the buyer – but that’s not a guarantee, according to O’Neil.

“In theory, if the builders are paying less in development charges, they should pass on those savings to the consumer,” he said, “but builders could decide to say, ‘We’re saving on development fees, but we’re not passing those savings off.’ They have every right to do so, but then they’re not going to sell any homes because it’s still too expensive.”

He’s sceptical whether prices in the newbuild space will fall low enough under that new program to make the sector an appealing option compared to the resale market.

“Is it going to drop the price per square foot down to $1,000 for condos specifically in Toronto? I don’t think it will,” he said. “Right now, you can go to King and Spadina and buy a resale condo for $900 per square foot.

“So why would you buy something for $1,350? It’s brand new, which is good, but is brand new worth a 30% price premium? Definitely not.”

Homebuilders’ association gives cautious thumbs up to government moves

The Canadian Home Builders’ Association (CHBA) has welcomed steps by the federal and provincial governments to address the housing supply and affordability issues, and said it was “encouraged” to see feds support construction of market-rate housing for ownership.

But the association says more work is needed to move the needle on housing, “including changes to the mortgage stress test for both insured and uninsured borrowers that would enable more well-qualified buyers to purchase a home.

“These measures can be implemented quickly and at little to no cost, while having an immediate meaningful impact on housing supply and affordability in communities across the country," a CHBA statement said.

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!

Ontario moves to scrap HST on new homes in one-year push

Ontario homebuyers are set to see a rare tax break on new construction, with the province proposing to remove the full 13% Harmonized Sales Tax (HST) on eligible new homes for one year in partnership with Ottawa.

The measure, to be detailed in the March 26, 2026 budget, targets new homes up to $1 million and offers scaled relief up to $1.85 million.

Under the plan, buyers of new homes valued up to $1 million will receive a maximum rebate of $130,000, covering both the provincial and federal portions of HST.

That full $130,000 will maintain up to $1.5 million, then phase down to $24,000 for homes priced at $1.85 million and above. The program is slated to run from April 1, 2026 to March 31, 2027, with construction timelines extending to as late as 2031 in some cases.

“In the face of tariffs and economic uncertainty, our government is working closely with the federal government to do everything we can to lower costs for families, keep workers on the job and build the most competitive, resilient and self-reliant economy in the G7,” Premier Doug Ford said.

“Today’s announcement will provide meaningful and significant relief to the people of Ontario, helping thousands more families realize the dream of homeownership and boosting Ontario’s economy by $2.7 billion.”

Government officials estimate the expanded rebate could stimulate an additional 8,000 housing starts, support up to 21,000 jobs and deliver about $2.2 billion in joint tax relief.

“Ontarians have seen costs increase as a result of ongoing economic uncertainty, so it is more important than ever that we continue to keep costs down to make life more affordable for families and individuals,” Peter Bethlenfalvy, Ontario’s finance minister, said.

“With this enhancement and expansion of the HST rebates, we are supporting home affordability while providing relief to hardworking Ontario families on one of the biggest financial transactions of their lives.”

Local officials framed the move as one piece of a broader affordability response, especially in high-growth markets such as Mississauga.

“As a city, we welcome this important step to make homes more affordable,” Mississauga mayor Carolyn Parrish said.

“The provincial government’s HST cut would help turn Mississaugans’ homeownership dreams into reality.”

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 will it take to get hesitant homebuyers off the sidelines?

Housing affordability may still be tight across Canada, but it improved in virtually every major market at the beginning of the year amid sliding home prices and weaker demand.

Still, that trend hasn’t seen a big upswing in buyers entering the market, with a variety of factors – including a harsher-than-usual winter and continuing economic uncertainty – keeping plenty of potential purchasers on the fence.

A recent analysis by Royal Bank of Canada (RBC) highlighted how home resales plunged at the beginning of the year across key markets including Vancouver, Calgary, Toronto, Edmonton and Montreal, with new listings also surging in the latter two.

Rates on the up as Middle East conflict spills over

For mortgage brokers and lenders, the question of how to coax hesitant buyers into the market has no easy answers, especially with the ongoing conflict in the Middle East injecting fresh uncertainty into the economic and inflation outlooks.

Five-year Government of Canada bond yields, a key driver of fixed mortgage rates, have increased by nearly 10 basis points since Friday amid skyrocketing oil prices and fears of a protracted US-Iran war.

And Canadian Mortgage Professional readers don’t seem to be counting on much help from the Bank of Canada either, with 50% of respondents to our latest poll currently indicating they expect no cuts at all for the remainder of the year.

That’s bad news for buyers on the margins whose affordability is already stretched. But could it also boost the renewal and refinance markets in the short term if borrowers rush to lock in current rates in the expectation that they’ll spike in the months ahead?

“In the [Edmonton] housing market, the sales side was down at one point by 23% year over year in the early part of the year,” Brokers for Life’s Len Lane (pictured top), a broker based in the city, told CMP.

“But as far as the mortgage side of it goes, it’s a strong renewal market. We seem to be seeing a lot of refinances, and people are realizing that the rates might be going back up depending on what happens where in the world.”

Length and intensity of Iran conflict likely to determine economic impact

In terms of the war’s ultimate impact on Canada’s housing market this year, Lane says much will depend on how long it continues.

This week has seen seemingly contradictory signals from the US on that front, with Donald Trump suggesting the conflict could end soon but also ramping up attacks. Iran’s new supreme leader Mojtaba Khamenei, meanwhile, appears determined to keep the Strait of Hormuz – an essential conduit for the flow of oil – closed to disrupt the global economy and keep oil prices rising.

For now, the economic impact of the conflict remains unknown. But a longer-term war would almost certainly weigh more heavily on the Canadian economy.

“I think about [the war] being inflationary more than anything,” Lane said. “$100 oil, if it’s only there for a couple of weeks, doesn’t have that big an effect. It really needs to be 90 days, 180 days out to really make any kind of different impact.”

But while pricier markets like Toronto and Vancouver might continue to struggle for the rest of the year, Lane doesn’t see a deep freeze in Edmonton, a typically more balanced and affordable city for housing.

And slowly climbing mortgage rates, he added, could jolt some buyers off the sidelines to lock in a fixed rate on a purchase before costs spiral out of control.

“I think people will still jump into the market because they see that rates plateaued in the 4% range,” he said. “Housing prices, while the sales were still slow, really didn’t come down a whole lot.

“So I think everybody kind of sees it as: If you’re going to get in, now is the time. I don’t see the Bank of Canada moving in either direction for a while until they figure out what’s going on worldwide as well.”

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 Iran turmoil and the latest BoC decision mean for Canada’s housing market

Canada’s housing market hadn’t exactly been blazing a trail in the early weeks of 2026, but the eruption of conflict in the Middle East since the end of February only looks likely to keep activity muted.

That’s because the market is being hit with a “double whammy,” according to Bank of Montreal (BMO) chief economist Doug Porter (pictured top): potential price squeezes at the pump and a likely runup in interest rates as five-year Government of Canada yields climb.

“It’s not good. On the one side, there’s the hit to confidence because of the uncertainty for the outlook and the very real hit to people’s pocketbooks from higher gasoline prices,” he told Canadian Mortgage Professional.

“At the same time, we’ve had this backup in long-term bond yields, which is threatening to push up longer-term mortgage rates. It’s tough for the housing market on both fronts.”

Porter was speaking shortly after the central bank revealed its decision to hold its policy rate steady in March, keeping that trendsetting interest rate at 2.25% amid concern about a possible inflation flareup from the war.

While financial markets see the central bank potentially hiking in the months ahead, Porter views cuts as the better option for the Bank – even if he says a prolonged rate hold between now and the end of the year is likelier.

A rate cut? ‘It doesn’t seem like they have a lot of appetite for it’

If the economy continues to weaken and Bank decisionmakers pivot towards a cut, could reduced rates provide a shot in the arm to the housing outlook?

In previous tough economic situations such as the 2007-08 global financial crisis and the COVID-19 pandemic, significant Bank of Canada rate cuts eventually stabilized and improved housing market activity, Porter pointed out.

But mortgage professionals and shoppers shouldn’t count on big downward moves by the Bank in the coming months.

“I still think every basis point matters for the housing market, whatever the economic backdrop is,” Porter said. “Having said all this, I think the chances of the Bank cutting are pretty low.

“It doesn’t seem like they have a lot of appetite for it, and the market is leaning very heavily against that.”

Aside from concerns around the economic impact of the war in Iran, a number of other factors are keeping homebuyers on the sidelines – not least growing signs of a weaker than anticipated economy and continuing concerns over the trade outlook as review of the US-Mexico-Canada Agreement (USMCA) looms.

The economy has unexpectedly shed tens of thousands of jobs, Statistics Canada revealed last week, as the unemployment rate also ticked higher.

Meanwhile, the North American trade review – which will arrive by the summer against the backdrop of continuing trade turmoil between the US and Canada – has been flagged as a potential gamechanger for the housing outlook.

A sliver of good news arrived on Monday with the announcement that the annual consumer price index (CPI) slid to 1.8% in February, a bigger fall than most economists had expected, although it remains to be seen how oil price fluctuations and geopolitical tensions impact that gauge looking ahead.

Interest rates likely to hold steady – or increase – in 2026

For now, the Bank of Canada and its governor Tiff Macklem struck a measured tone on both the inflation outlook and labour market in their remarks after Wednesday’s rate decision.

“The economy was weaker than they expected going into the conflict, and inflation was, if anything, slightly better than expected,” Porter said. “They didn’t really say that, but I think it was.”

Other top economists have echoed Porter’s view that the policy rate will likely remain on hold for the rest of 2026, even though financial markets are leaning more strongly towards a rate hike.

“Amid a fluid and constantly evolving situation, we expect the BoC to remain prudent, maintaining the overnight rate at 2.25% while awaiting additional clarity,” Royal Bank of Canada (RBC) senior economist Claire Fan wrote after the decision.

And Oxford Economics’ senior Canada economist Michael Davenport sees the central bank holding steady. “The Bank has been clear in the past that it doesn’t think monetary policy can effectively deal with adverse supply shocks,” he said.

“With the economy still in excess supply and signs of a deteriorating labour market, we think the BoC will likely wait out the storm and hold the overnight interest rate steady in slightly stimulative territory at 2.25% for all of 2026.”

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!