What would it take for the Bank of Canada to move interest rates?

The Bank of Canada held its benchmark rate steady for the fifth consecutive decision last week, and currently looks in no mood to step off the sidelines as economic uncertainty continues.

Most forecasters expect more of the same from the central bank for the foreseeable future – but that doesn’t mean rates are frozen forever. So what would actually need to happen for Bank decisionmakers to consider either a cut or a hike?

Sal Guatieri (pictured top), senior economist and director at Bank of Montreal (BMO) Capital Markets, told Canadian Mortgage Professional the bar for action in either direction is high, but not necessarily unreachable.

The case for a hike

One of the biggest threats to Canada’s economic outlook is no secret: surging oil prices since February as a result of the US-Israel war on Iran, putting upward pressure on inflation and squeezing Canadians at the pumps.

While positive news emerged late on Sunday as US president Donald Trump suggested an end to the war could be imminent, there’s still no sign of a deal – and if the war rumbles on and continues to spike the price of oil, Guatieri said it could spur the Bank into hiking rates.

“If higher energy costs do spread to other prices and we see a generalized increase in inflation, they may need to take action and raise rates,” he said.

Bond markets currently see an 8% chance of a 25-basis-point hike at the Bank’s July 15 meeting, rising to 32% by September 2, according to nesto.ca’s rate forecast tracker. Scotiabank is the most hawkish of Canada’s major banks, forecasting 50 basis points’ worth of hikes in the fourth quarter of the year.

The case for a cut

While inflation outlook remains troubling for the Bank, governor Tiff Macklem was frank about the current weakness of the Canadian economy in his remarks to the media last week – even if he stopped short of describing it as a recession.

While the labour market unexpectedly added nearly 90,000 jobs at last reading, the economy has sagged under the weight of US tariffs and broader uncertainty since the beginning of 2025 – and there seems little chance of it roaring back between now and the end of the year.

Further weakness in gross domestic product (GDP) could prove a key variable in the Bank of Canada’s approach to the rest of the year, according to Guatieri.

“If we see further shocks to Canada’s economy… if we see further evidence of weakness in the economy and no clear signs of a pickup in GDP growth in Q2, that could spur the Bank of Canada into action as far as providing more support to the economy by cutting interest rates,” he said.

Like Macklem, many major economists have questioned whether the country is actually in a recession despite recording consecutive GDP declines on a quarter-over-quarter basis.

The bottom line

Brokers and borrowers would undoubtedly welcome rate cuts because they could provide the impetus for the housing market to gather pace with a subdued first half of the year nearly over.

Affordability has remained a huge challenge in the housing sector, with Ratehub reporting that most Canadian markets saw buying prospects worsen in April thanks in part to climbing interest rates.

Still, a cut remains a distant prospect – and by far the most likely scenario is a prolonged hold by the Bank as the Iran conflict and CUSMA (Canada-United States Mexico Agreement) renegotiations continue.

Guatieri said it would take a significant deterioration in the economic outlook for the Bank to step off the sidelines and cut rates, while a hike is also unlikely.

“Unless something goes wrong further in the economy or with respect to tariffs… we’re unlikely to see the Bank of Canada cut interest rates,” he 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!

It’s official: Canada is one of the world’s least affordable housing markets

 Canada ranks among the world’s least affordable housing markets, trailing the United States and the United Kingdom.

That finding comes from the 2026 Demographia International Housing Affordability report, released June 11 by the Frontier Centre for Public Policy. The report assessed 96 major markets across eight countries using the median multiple – median house price divided by median household income.

A ratio of 3.0 or below is considered affordable. Canada’s national median multiple reached 5.4, placing it in the “severely unaffordable” category.

For context:

• United States: 4.5
• United Kingdom: 5.2
• Canada: 5.4

Canada was also one of only two nations in the study to record no improvement in housing affordability in 2025. Four of the eight countries surveyed posted measurable gains.

Nine quarters of improvement, one stubborn ceiling

The Demographia findings land alongside data that looks, on the surface, more encouraging.

National Bank of Canada’s Housing Affordability Monitor, published May 26, 2026, recorded a ninth consecutive quarterly improvement in Q1 2026 – the longest such streak in Canadian history. The mortgage payment as a percentage of income fell to 52.3 per cent nationally. That is its lowest level in four years.

But that record run, read alongside Demographia, defines the bind brokers are working inside. Affordability is improving by cyclical measures. Canada remains structurally among the least affordable nations in the world.

The National Bank data shows the gaps:

MPPI = mortgage payment as a percentage of income. Source: National Bank of Canada Housing Affordability Monitor, Q1 2026.

City	MPPI Q1 2026	Long-term average	Above average by
Vancouver	81.9%	66.1%	+15.8pp
Victoria	74.5%	59.3%	+15.2pp
Toronto	70.9%	54.4%	+16.5pp
Hamilton	59.0%	42.6%	+16.4pp
Calgary	39.3%	36.3%	+3.0pp
Edmonton	33.3%	30.2%	+3.1pp

All six markets remain above their long-term averages. Edmonton and Calgary are the closest to normal, while Vancouver, Toronto, and Victoria remain the most stretched.

Vancouver, Toronto, and the limits of progress

Canada’s affordability problem is sharpest at its two biggest markets.

Vancouver recorded a median multiple of 10.8. That places it among the world’s least affordable major markets, behind only Hong Kong, Sydney, San Jose, and Adelaide.

Toronto recorded 7.6, remaining firmly in the severely unaffordable range.

Edmonton was the outlier. At 3.6, it is Canada’s most affordable major market – and the highest affordability ranking ever achieved by a non-American market in the survey’s 22-year history.

Not a single market among the 96 studied hit Demographia’s affordability benchmark. American cities Cleveland (3.1) and Pittsburgh (3.2) came close.

“Many Canadians assume housing affordability challenges are simply the result of growing cities and strong demand, but the international data tell a different story,” said Wendell Cox, principal author of the report.

“Canada now ranks among the least affordable housing markets in the developed world despite having abundant land and resources. The evidence shows that housing affordability is strongly influenced by policy choices that affect land supply and housing development.”

Policy, not demand

The report pushes back on the idea that Canada’s affordability crisis is primarily a demand problem.

Wendell Cox pointed to restrictive land-use policies – urban growth boundaries, greenbelts, and development constraints – as strongly associated with higher housing costs. The report points to New Zealand as a counterexample: a government that has moved to dismantle policies blamed for restricting land supply.

The downstream effects for brokers are direct. Higher median multiples mean:

• larger required down payments
• higher debt loads for clients entering the market
• reduced labour mobility as households are priced out of employment centres

“The goal should be to restore housing affordability for ordinary households,” Cox said. “The experience of many jurisdictions shows affordability can improve when governments remove barriers to housing supply and allow development to respond to demand.”

What brokers should watch

National Bank’s economists flagged that the improvement streak may face pressure in Q2 2026. Mortgage rates have resumed an upward trend following expectations of tighter monetary policy.

Home prices fell nationally in April 2026 – declining in six of eleven cities – which may partially offset that pressure. But the Demographia data draws a clear line between cyclical relief and structural affordability.

Canada’s nine-quarter improvement streak has brought the mortgage payment-to-income ratio back to 2022 levels. For brokers advising clients in Vancouver and Toronto, the gap between short-term gains and long-term affordability remains the defining challenge of the current market.

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 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!