Rate-hike jitters are pushing buyers to the sidelines as the Canadian housing market braces for a slower end to the year
The Canadian Real Estate Association (CREA) has lowered its home sales forecast for a third straight quarter, now projecting 444,530 residential transactions through Multiple Listing Service® (MLS®) Systems.
That would be a 5.2% drop from 2025, as rising fixed mortgage rates and the threat of a Bank of Canada hike sideline buyers.
The October 16 revision strips 18,806 sales from CREA’s July estimate, when the association expected a far milder 1.4% annual decline in home sales.
The national average price is now forecast to edge up just 0.2% to $681,681, roughly $5,000 below the summer call.
How rising fixed mortgage rates hit September home sales
CREA said oil prices began climbing again in early September while the Bank of Canada struck a more hawkish tone, with markets now pricing in approximately 100 basis points of hikes by this time next year.
The five-year Government of Canada bond yield, which lenders use to price fixed mortgages, closed at 3.60% on October 2, up from 3.35% on September 1.
September sales fell 2.3% from August and 7.7% from a year earlier. The national average sale price was $666,538, down 1.6% year over year.
Lenders saw the repricing coming.
“I think rates will probably go up in October. GIC rates are up 35 points in the last sixty to ninety days. Bank of Canada bond rates are up 60 points. Like everything’s been going up already. So it’s just a natural part of the market,” Grant Armstrong, chief growth officer at WealthOne Bank of Canada, said at MortgageFest Canada in Toronto in September.
Victor Tran, a mortgage agent at Tango Financial in Toronto, is already seeing borrowers rethink their options.
“The variable-rate forecast isn’t looking too good either,” Tran told Canadian Mortgage Professional as bond markets turned volatile in September.
“So we have people sitting in variable rates considering locking into fixed rates, for example.”
Tracy Valko, founder of AIMI Mortgage Collective, said brokers need to be able to explain those forces to clients.
“There’s a lot of global tensions right now that are affecting our market. What’s affecting bond yields? What affects fixed rates? Agents and brokers should know that. We as mortgage agents and brokers should never predict, but one thing we should do is make sure that we understand the knowledge so we can future-prepare homeowners for what could be coming down the pipeline,” Valko said at the event.
Ontario and BC weigh on 2026 home prices
CREA expects Ontario’s average price to fall 3% to $809,334 and British Columbia’s to slip 0.8% to $944,685 this year, while Newfoundland and Labrador (5.7%) and Saskatchewan (5%) lead gains.
For 2027, it forecasts a 4.4% rebound to 464,235 sales and a 1.2% price gain to $689,909, assuming limited action from the central bank. Even that recovery would leave sales about 4,400 below 2025 levels.
Andy Kuyper, head of partnerships and secured lending at TransUnion, was cautious on timing.
“I’d like to be optimistic. I think we’re facing the reality that with the geopolitical climate and everything that’s happening here, our mortgage industry is probably not ready to rebound. We are seeing slight growth in originations, we’re seeing slight growth in mortgage balances – a lot more on the refi side,” he said at MortgageFest.
Brokers say the slowdown raises the value of advice over price.
“Now more than ever it’s so important for people to use a mortgage broker rather than their bank, because the banks are specifically just focusing on rates. As we head into a turbulent time where potentially we will see an increase in rates, the banks are putting clients in, say, a variable rate, which may not be the best option for that client – just because it has a three in front of it,” said Sabeena Bubber, a mortgage broker at Xeva Mortgage.
Valko expects little relief. “The next two years are going to be very similar to what we’re dealing with right now. Staying a best-rate mortgage broker is not going to get you the goals that you want,” she said.
Dr. Sherry Cooper, chief economist at Dominion Lending Centres (DLC), expects a hike by late 2026 or the first half of 2027.
“We have to expect higher interest rates, which also means that fixed-rate mortgages are very attractive now,” she said.
The Bank of Canada’s next rate decision is October 28.
Make sure to get all the latest news to your inbox on Canada’s mortgage and housing markets by signing up for our free daily newsletter here.
