Analysts highlight the economic factors still impacting housing
The Bank of Canada’s decision to hold its key interest rate steady at 2.75% is expected to keep the country’s sluggish housing market on its current trajectory, according to real estate experts.
The central bank’s announcement on Wednesday marks the first time it has paused rate changes after seven consecutive cuts since June. While the move may signal a more cautious monetary stance, observers say it offers little to boost consumer confidence or reinvigorate the housing sector.
“The housing market overall has been sluggish for months, with a spring market that is much more muted than in previous years,” said Victor Tran, a mortgage and real estate expert with Ratesdotca, in a press release. “This state of the housing market is not likely to change much with this rate hold.”
Factors influencing homebuying decisions
Following signs of recovery in late 2024, national home sales had begun to pick up in response to earlier rate cuts. However, mounting economic uncertainty—particularly tied to the ongoing US-Canada trade war—has dampened optimism for a sustained rebound in 2025.
Penelope Graham, a mortgage expert at Ratehub.ca, noted that homeowners with variable-rate mortgages will see no change in their current payments as a result of the rate hold.
“Today’s rate hold will do little to re-incentivize homebuyers, who have been increasingly hesitant to enter the market amid tariff uncertainty,” said Graham. “In volatile market conditions, it’s a great idea for those shopping for a mortgage or coming up for renewal to seek out a pre-approval to hold today’s rates for up to 120 days. This helps protect against short-term rate fluctuations.”
Outlook
Looking ahead, Tran suggested that the housing market could show signs of revival if forecasts of further rate cuts materialize later this year. Two additional reductions in 2025 could lower variable mortgage rates and improve affordability, though he warned that broader economic factors remain unpredictable.
“Though it’s difficult to predict, as purchasing trends will be affected by what’s happening in the broader economy, and we don’t have a clear picture of that yet,” he said.
Meanwhile, despite recent fluctuations in bond yields, Tran noted that fixed mortgage rates have remained relatively stable. He cautioned that continued increases in bond yields could eventually lead to higher fixed rates.
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