Homebuyers might normally be tempted to enter the market to get ahead of rate increases – but that’s not happening, says Royal LePage CEO
The Bank of Canada is still expected to hold rates steady at its next meeting on October 28, but financial markets are pricing in an increasing likelihood that the central bank will start hiking in the months ahead amid continuing concerns about the inflation outlook.
While a sluggish labour market looks set to tip the balance in favour of another BoC hold at the end of the month, experts don’t see that wait-and-see approach lasting for long.
Dominion Lending Centres Group (DLCG) chief economist Sherry Cooper suggested a rate increase could arrive as soon as December 9, the Bank’s last scheduled rate decision of the year, as global pressure gathers for central banks to take a more aggressive stand on inflation.
The BoC’s benchmark rate, which strongly influences variable Canadian mortgage rates, has remained unchanged throughout the year to date. But fixed rates have been climbing in recent weeks, reflecting jitters in global bond markets and adding further complications for mortgage shoppers.
A rate increase by the US Federal Reserve in its last decision also sparked speculation that Canada’s central bank could be set to follow suit soon.
Rising rates are tempering already subdued expectations for the housing market. On Friday, the Canadian Real Estate Association (CREA) slashed its 2026 home sales forecast for the third consecutive quarter, while TD has also revised its own outlook.
Why potential homebuyers aren’t pushing ahead
The looming possibility of Bank of Canada rate hikes might sometimes spur potential homebuyers into action because their borrowing costs could be much higher if they wait for a few months.
Amid the current economic uncertainty, that doesn’t appear to be the case, according to Royal LePage president and chief executive officer Phil Soper (pictured top). He told Canadian Mortgage Professional that would-be buyers still appear to prefer sitting on the sidelines because they’re nervous about the US-Canada trade war and rising inflation.
“You’d expect with lots of chatter about rate increases in Canada online bubbling through communities – plus the recent significant rise in fixed-rate mortgages in the United States – that there’d be some pull-ahead in activity,” Soper said. “You’d see some people that were planning to get into the market in the spring of 2027, for example, jumping in now to get ahead of anticipated higher borrowing costs.
“Yet we’re not seeing material changes in the trajectory of transaction volumes. It’s very flat. And what that says to me is even an incentive like that is not enough to get people off the sidelines if they’re feeling very uncomfortable.”
Soper: Fundamentals in place for healthy market, but Canadians remain nervous
Royal LePage now expects a more modest pace of national 2026 home price growth than it first anticipated. In its second-quarter house price survey, the real estate firm said prices would likely jump by 2% by Q4 – but it’s revised that to 1%, reflecting the deep freeze that still grips the market.
Major markets including Toronto and Vancouver saw prices continue to slide in the second quarter, according to Royal LePage, although other cities including Montreal bucked the national trend.
Soper suggested meaningful change in the housing market outlook might not arrive unless positive news emerges on the trade war, which has seen the US and Canada exchange a flurry of tariffs and counter-tariffs on products crossing the border.
“It doesn’t seem that anything will budge Canadians from their rigor mortis while this trade war is raging with the United States,” he said. “What I mean by that is we’ve got pent-up demand, we’ve got reasonable mortgage rates, we’ve got lower home prices, employment’s reasonable and steady, and savings are high.
“All the fundamentals are in place for a much more active housing market, but our research shows first-time homebuyers in particular are just so nervous about the trade war, and in particular Donald Trump’s behaviour and what it might mean to Canada and ultimately to them, that they are sitting on the sidelines and waiting.”
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