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- calendar_today October 21, 2026
Potential Bank of Canada Rate Hike Raises Concerns
The Bank of Canada has kept interest rates steady since July 2023, but growing anticipation of a rate hike at the upcoming Oct. 28 meeting is fueling uncertainty in Canada's real estate market. While an eighth consecutive rate hold is widely expected, more economists and traders are forecasting a hike as the central bank aims to tackle stubborn inflation plaguing the economy.
Impacts on the Canadian Housing Market
With the possibility of higher rates, mortgage and debt experts warn of immediate consequences for the sagging Canada housing market. Variable-rate mortgage holders would feel the pinch right away, as would those seeking new fixed mortgages. Scott Terrio, manager of consumer insolvency at Hoyes Michalos & Associates in Ontario, described the situation as dire: "The housing market is kind of on its knees right now, and rising rates is like tossing a drowning guy an anchor." Terrio emphasized that a rate hike "would reverberate massively" through the sector.
Fewer Buyers, Shifting Market Dynamics
Higher rates typically reduce the pool of eligible buyers, shifting bargaining power away from sellers. Those who can qualify for larger loans may have an advantage, but the overall volume of transactions is expected to drop. This adjustment in market dynamics could foster further declines in home prices.
Real Estate Activity at Historical Lows
Ben Rabidoux of Edge Realty Analytics notes home sales volume is already at a 25-year low. He describes buyer confidence as "unbelievably weak across the country," driven by a mix of economic uncertainties, from trade tensions with the U.S. to the rapid advancement of AI technology and its impact on jobs. Per capita home sales have returned to levels last seen during the recession-hit 1990s. Rabidoux believes a "gradual grind lower" for home prices over the next several months is likely if interest rates begin to move upward.
Forecasts from the Canadian Real Estate Association
The Canadian Real Estate Association (CREA) has downgraded its 2026 forecast for home sales for the third straight quarter, now expecting 444,530 homes to be sold by year-end—representing a 5.2 per cent drop from 2025. CREA cited a "notably more hawkish tone" from the Bank of Canada as a key factor in its revised outlook.
Inflation and Global Energy Uncertainty
The central bank's policy rate has remained at 2.25 per cent since a quarter-point reduction in October 2025. In recent comments, Bank of Canada Governor Tiff Macklem warned borrowing costs may rise further if energy prices stay high, amid geopolitical tension in the Middle East which has driven recent volatility. New data from Statistics Canada highlights rising fuel prices in September 2026, with businesses expecting further price increases, although these costs have yet to significantly affect other consumer goods.
Market Outlook: Interest Rate Decisions in Focus
Survey results reflect a split among institutions as to what will happen next. While consensus still leans toward another rate hold, financial groups like the Bank of Montreal, RBC Dominion Securities, and Desjardins Group have recently updated their expectations to predict a hike. According to Bloomberg, overnight swap market traders now give an 87 per cent probability to a 25-basis point Bank of Canada rate hike next week, up from 70 per cent earlier.
Expert Predictions on Future Rate Moves
Derek Holt, head of capital markets economics at Scotiabank, argues that evidence now likely supports a rate increase, though calling it "not a slam dunk." Macquarie Group economist David Doyle foresees the central bank raising its policy rate by as much as 125 basis points through the end of 2027. Leah Zlatkin, mortgage broker and expert commentator for LowestRates.ca, predicts that any coming rate hike would mark the beginning of an extended tightening cycle.
Buying Opportunities and Risks
Zlatkin points to recent price drops in the Greater Toronto Area and remarks, "There's a possibility [that] housing prices are going to continue falling, but the reality is, if you'll qualify for the property today, then you'll qualify again later on if rates rise." For buyers able to secure financing, conditions may be favorable, but ongoing uncertainty around inflation, mortgage rates, and borrowing costs remain key risks hanging over the real estate market.
Source: cbc.ca.
