September resales drop as trade war anxiety and rising fixed rates push buyers to the sidelines
Canada’s housing market retreated in September, snapping a four-month run of tentative improvement as escalating Canada-US trade tensions and rising Bank of Canada (BoC) rate expectations converged.
National resales fell 2.3% month-over-month on a seasonally adjusted basis. The MLS Home Price Index declined 0.4% from August, sitting 3.5% below year-ago levels, and new listings contracted 1.8%, according to an RBC Economics report by Rachel Battaglia, economist at Royal Bank of Canada (RBC) in Toronto.
“After a four-month run of modestly positive progress on demand, supply, and prices, many of Canada’s housing markets took a step back in September,” said Shaun Cathcart, senior economist at the Canadian Real Estate Association (CREA) in Ottawa.
“This was hardly surprising given the latest jump in fixed mortgage rates, and with the Bank of Canada now widely expected to follow with a rate hike before the end of the year.”
“September’s decline reflects the bumpy recovery we’ve been expecting as households navigate shifting trade policy and rising borrowing costs,” Battaglia said.
“Bond yields have already begun climbing in anticipation of BoC rate hikes, pushing fixed-rate mortgage rates higher before the central bank moves.”
Fausto Gaudio of IC Savings argues that home prices remain too disconnected from incomes, making it increasingly difficult for first-time buyers to enter the market and highlighting the need for a broader affordability reset. https://t.co/3PehdHgrJn
— Canadian Mortgage Professional Magazine (@CMPmagazine) October 13, 2026
Rates rising — but the scale is different this time
RBC expects the BoC to raise its overnight rate by a cumulative 1% across 2027.
“We look for the BoC to hike the overnight rate by a total one percentage-point in 2027 — a far cry from the last tightening cycle when the rate shot up from 0.25% to 5% in just over a year,” Battaglia said.
“Moreover, those rate hikes are likely still contingent on an improving Canadian economy.”
She added that “the gradual pace shouldn’t trigger the same magnitude of pullback in post-pandemic resales as before” — a meaningful distinction for brokers framing client risk heading into renewal season.
Mathieu Laberge, chief economist and senior vice-president at Canada Mortgage and Housing Corporation (CMHC) in Ottawa, echoed that caution at the Mortgage Professionals Canada National Conference in Calgary.
“I don’t see rates going up anytime soon,” he told attendees, though he noted 2027 increases remain probable once the economy firms.
Regional divides deepen from coast to coast
The steepest corrections are hitting where affordability is most stretched.
Resales fell 5.3% month-over-month in the Greater Toronto Area and 6.2% in Greater Vancouver, while Victoria posted the sharpest national decline — a 25% month-over-month collapse — per the RBC report.
Tightening new listings across most Ontario and Vancouver markets provided a floor for prices despite the volume pullback.
With trade tensions stalling Canada’s fall housing market, Quebec is arriving late to the affordability reckoning.
Montreal is showing the first signs of pricing strain as new listings creep higher, while Prairies markets — Winnipeg, Regina, Saskatoon, and Edmonton — are loosening gradually, though most still favour sellers.
Atlantic Canada is split, with Halifax and Newfoundland and Labrador recording resale gains since April 2026.
Phil Soper, president and chief executive of Royal LePage Canada, told Canadian Mortgage Professional the standstill is confidence-driven, not fundamentals-driven.
“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.
“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.”
RBC’s outlook is cautious but not pessimistic. “In this environment, we expect the housing market recovery will continue, but gradually with ups and downs,” Battaglia said.
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