The Bank of Canada Raises Its Rate to 2.5 Per Cent, and the Waiting-for-Cuts Plan Is Over

The Bank of Canada raised its policy rate this morning by a quarter point, to 2.5%.  It is the first increase since July 2023 - ending seven straight holds at 2.25 %  Many people in the bond market felt it coming, as well as a Reuters poll of economists last week. Those who carry a variable-rate mortgage will see it on your next statement.

The sentence in the statement that matters most is this one: "There could be a need to increase the policy rate further, but given uncertainties, we will proceed carefully." The Bank is not promising another hike but it has stopped talking about cuts altogether, and Governor Macklem said that risks to inflation had increased and there was "less scope for monetary accommodation." Anyone who spent 2026 waiting for lower rates before renewing, buying, or selling now has to rethink.

Why the Bank moved when core inflation is near 2 per cent

The reason is primarily the cost of oil.  Crude has been trading around US $110 a barrel because of the war in the Middle East, against the US$75 the Bank assumed in its July forecast, and gasoline was up 27.8 per cent year over year in September (Statistics Canada).  Headline inflation came in at 3.1%, above the Bank's 1 to 3 per cent range, and it has sat near 3% since April.  Strip out gasoline and inflation was 2.2%, with the core measures close to 2, which is the case made by economists who wanted another hold.  The Bank is looking six to twelve months out, and the longer energy stays expensive the more likely trucking firms, grocers and landlords pass the cost along.  The new Monetary Policy Report has inflation reaching about 3.5 per cent by year-end, averaging 3% through 2027, and only getting back to 2 per cent by the middle of 2028. 

What a quarter point costs on a variable mortgage

Prime at the big banks is 4.45% at the time of writing, but I would expect it to go to 4.70%, most likely effective Thursday.  On a $600,000 adjustable-rate mortgage at prime minus 0.80 with 25 years left, the payment goes from about $3,043 a month to about $3,124, an increase of roughly $80.  Nobody sells a house over $80 a month, but stacked on top of a renewal from a 2021 rate, though, it is the kind of number that makes a family in Markham decide the four-bedroom move is a 2028 conversation rather than a 2027 one.  If your variable mortgage has a fixed payment, more of each payment now goes to interest and less to principal.

If you are on a fixed rate, today changed nothing on your statement and very little on the rate sheet either.  Five-year fixed mortgages are priced off the five-year Government of Canada bond, and that yield rose about 20 basis points in the month leading into this decision.  Many lenders repriced weeks ago.  The question for fixed-rate borrowers is the next six weeks: the Bank meets again on December 9, and the bond market will spend November deciding whether "proceed carefully" means one more move or none.

What it does to our market

I would push back on the gloom a little - TRREB's September numbers had GTA sales down 9% from a year earlier, but new listings were down 14.4% and active listings down 9.3%, and prices rose about 1.3% from August even while sitting below last year's levels.  York Region finished September with roughly five months of inventory, which is a buyer's market on paper and a balanced one on the streets I work, where a well-kept house in Unionville still draws three or four showings its first weekend while the tired ones sit.  A quarter point does not change that split.

What it changes is the story buyers have been telling themselves since spring, that waiting costs nothing because rates would be lower by the time they were ready.  The Bank has now said otherwise.  Over the years that kind of message has pulled as many fence-sitters into the market as out of it, because waiting suddenly has a price.  The Bank's own report expects housing to stay weak into next year, and nationally I would not argue.  Locally, scarce listings and soft sales add up to a stalemate rather than a slide, and a stalemate tends to break toward whichever side blinks first.  For sellers that argues for pricing to the last sixty days of sales and not to 2022, because the buyers who remain are well qualified and in no hurry.

The one thing I would do today is call your lender if you have a renewal anywhere in the next twelve months and ask for a rate hold.  It costs nothing and buys up to 120 days of protection in a market where the five-year bond can move 20 points in a month.  A pre-approval is stress-tested at a rate well above what you actually pay, so nobody who qualified last week stopped qualifying this morning.  What changed is the monthly payment, and that number is worth seeing on paper before deciding anything.  I will be reading the December 9 decision as closely as anyone, and if you would like to go through your own numbers before then, you know where to find me.

A Bank of Canada Rate Hike Is Now a Coin Flip - Here Is What to Do Before October 28

Three weeks ago the safe assumption was that the Bank of Canada would sit still until spring, and that assumption is gone.  On Wednesday the U.S. Federal Reserve raised its rate by a quarter point, its first increase in more than three years, and by Thursday the market was pricing the Bank of Canada's October 28 decision as a coin flip, with the odds tilted slightly toward a hike (CP24 and The Canadian Press, September 18, 2026).  If you have a variable-rate mortgage or a fixed term that renews in the next year, here is what that shift means for your monthly numbers and what I would do about it now.

How we got from a hold to a coin flip in three weeks

On September 2 the Bank held its policy rate at 2.25 per cent for the seventh straight decision, with the market putting the odds of a hold at 94 per cent going in (Bank of Canada; LSEG data cited by The Canadian Press).  Two things changed the picture.  The first is inflation: Statistics Canada reported on September 14 that the consumer price index rose 3.0 per cent in August from a year earlier, the same pace as July, with rent up 2.8 per cent and Ontario leading that increase (Statistics Canada, The Daily, September 14, 2026).  Three per cent is the top of the Bank's comfort range.

The second is what the Bank itself said.  In the summary of its September deliberations, released on September 16, the governing council wrote that if higher energy prices spilled over into other parts of the CPI, "it could require a monetary policy response to prevent broad-based inflation from setting in" (Bank of Canada, Summary of Governing Council Deliberations, September 16, 2026).  Oil is above US$100 a barrel because of the conflict in the Middle East, and as RBC's Claire Fan put it, if one thing is driving the pricing of the October meeting, it is oil.  Most economists still expect the Bank to wait until early 2027, but a hold is no longer the only scenario worth planning for.

If you are on a variable rate

Prime sits at 4.45 per cent and the best five-year variable rates are around 3.40 per cent (Ratehub, September 18, 2026), and a quarter-point hike moves both by the same amount.  On a $700,000 mortgage with a 25-year amortization, a variable rate of 3.40 per cent costs about $3,458 a month and 3.65 per cent costs about $3,551, a difference of roughly $93 a month; a second quarter point would take it to about $3,644.  Those are real dollars, but not the kind of jump that upends a household budget, whatever the headlines suggest.  The larger risk sits with anyone on a variable mortgage with a fixed payment, where the payment stays the same while more of it goes to interest and the amortization quietly stretches.  If that is your mortgage, ask your lender for your trigger rate and how much principal you are actually paying down each month.

If your mortgage renews in the next twelve months

This is the group I am most concerned about, and it has little to do with October.  Many of the mortgages taken out in the busy fall of 2021 renew this fall and through 2027, and those borrowers locked five-year fixed rates near 2 per cent.  A $700,000 mortgage taken at 2 per cent in the fall of 2021 carries a payment of about $2,964 and a balance today near $586,000, and renewed over the remaining 20 years at this week's best five-year fixed rate of 4.24 per cent, the payment becomes about $3,616, roughly $650 a month more.  CMHC reports that borrowers who renewed over the past eighteen months saw payments rise by an average of $375 a month (CMHC, cited by Money.ca, September 2026), and the 2021 cohort is starting from a lower rate than most of them did.

The big banks raised five-year fixed rates last week after the Canada five-year bond yield climbed to about 3.65 per cent, its highest since 2024 (Canadian Mortgage Trends, September 17 and 18, 2026), so if your renewal is within 120 days, get a written rate hold from your existing lender and at least one other today.  A hold costs nothing.  And do not sign the first renewal letter that arrives in the mail, because the rate printed on it is rarely the lender's best, and a broker who shops it can usually do better for a borrower with strong equity.

If you are buying or selling this fall

For buyers, lock a pre-approval with a rate hold and run your numbers at a half point above today's rate, so an October surprise does not change what you can afford.  For sellers, August showed inventory across the GTA tightening faster than sales, and more so here in Markham (TRREB Market Watch, August 2026), which still favours a well-priced listing, but October's buyers are carrying slightly higher borrowing costs than August's, so price to the last sixty days of sales rather than to the spring.

Whatever the Bank decides on October 28, the useful work happens before then: know your trigger rate if you are variable, get a rate hold if you renew or buy within four months, and shop the renewal rather than signing the letter.  A quarter point is manageable for almost every household I work with; being surprised by it is what causes trouble.  If you would like to run your own mortgage against these scenarios, call me and we will go through it together.

Bank of Canada Holds Key Rate at 2.25%

The Bank of Canada left its policy rate at 2.25 per cent this morning, which is the outcome nearly everyone expected.  But if you are buying in Markham this fall, or you have a mortgage coming up for renewal, the rate the Bank announced is not the number that will decide what your payment looks like.  The number that matters is the bond yield sitting behind fixed mortgage rates, and that one has been climbing quietly all summer while the Bank has stayed still.

What the Bank actually said

The statement itself was measured.  CPI inflation has been hovering around 3 per cent in recent months, driven mainly by persistently higher gasoline prices, while the core measures the Bank watches most closely have stayed near its 2 per cent target.  At the same time the economy came in stronger than the Bank had penciled in, with second quarter GDP up 3.3 per cent against a forecast closer to 2.5 per cent.  Set against that, new American tariffs and Canadian counter-measures were announced after trade talks between the two countries broke down, which cuts the other way entirely.  Governing Council closed by saying it will assess the sustainability of the economic rebound and the outlook for inflation, and is prepared to adjust monetary policy as needed.  That is deliberately non-committal language, and it is worth reading it as exactly that.

Why fixed rates can rise while the Bank sits still

This is the part that catches people off guard every time, so it is worth being plain about it.  Your variable rate and your line of credit are tied to prime, which sits at 4.45 per cent and does not move on a hold, so if you are carrying a variable mortgage today nothing changed for you this morning.  Fixed rates work differently.  They follow the bond market, and the Government of Canada five and ten year yields have been drifting upward since early July, with the ten year now around 3.74 per cent after a move of roughly 36 basis points.  Lenders price fixed mortgages off those yields, not off the overnight rate, which is why you can have a central bank standing perfectly still and a fixed rate quote that is meaningfully worse than the one you were given in June.

The other shift is in expectations.  For most of the past two years the conversation in this market has been about when the next cut arrives.  That conversation has changed.  Roughly 63 per cent of analysts surveyed now expect the Bank's next move to be upward rather than downward, most of them pointing to the first half of 2027, and a couple of the big banks have floated the possibility of an increase as early as October.  I am not telling you to treat that as a forecast, because these calls move around constantly and the tariff picture could turn again.  I am telling you that planning around a cut that may never come is a weaker position than it was a year ago.

What this means for Markham specifically

Our local market is tighter than the national headlines suggest.  Markham recorded 288 sales in July at an average price of $1,131,324 and a median of $1,062,500, with a sales to new listings ratio of 39.4 per cent, the tightest in York Region.  Fewer sellers came out this summer than in the past couple of years, so the well prepared, sensibly priced home is facing less resale competition heading into the fall than it did last September.  For a buyer in Unionville, Cachet, or Berczy, that means the inventory advantage you may have been counting on is thinner than you think, and waiting has a cost on both sides of the ledger now.

What I would actually do

If you are buying, get your pre-approval refreshed this week rather than next month, and hold the rate while you can, since most lenders will guarantee a quoted fixed rate for 90 to 120 days and that hold costs you nothing if rates fall.  If you are renewing in the next year, start shopping four to six months ahead instead of waiting for the letter from your lender, and get a second quote before you sign the one in front of you.  And if you are selling, price against the last ninety days of comparable sales rather than what your neighbour got in a different rate environment, because buyers in this market are doing the payment math carefully and they will notice.

The Story

The hold is not the story.  Fixed mortgage rates are being pushed up by bond yields even while the Bank sits at 2.25 per cent, and the market's expectation has quietly flipped from the next cut to the next increase.  If you are buying or renewing in Markham this fall, lock a rate hold now and plan on today's numbers rather than a cut that may not arrive.

If you want to talk through what this means for your own timing, call any time.  Over the years we have walked a lot of Markham families through decisions exactly like this one, and it is always easier with the actual numbers in front of you.

Sources: Bank of Canada policy rate announcement, September 2, 2026; Canadian Mortgage Trends, September 2026; Toronto Regional Real Estate Board July 2026 market data.

An extra $30,000 in your pocket?

I'm sure if you are on our mailing list, you already are well tuned into what has been happening at the Bank Of Canada recently, and we are happy to see that they have continued the downward trend on interest rates, with their additional 0.25% reduction this Wednesday.   Bond rates also almost dropped a full point on Tuesday, likely in anticipation of Wednesday's rate drop - not a 52 week low, but within 0.75 points of it, which should have a direct impact on fixed-rate mortgages most directly. 

August 2024 market statistics

The Toronto real estate market experienced a modest increase in home sales in August 2024, with transactions rising by 0.6% compared to the previous month. However, the market remains well-supplied, as new listings increased by 1.5% year-over-year. The total number of active listings was 46% higher than in August 2023, which has helped keep price growth moderate. The MLS® Home Price Index Composite benchmark fell by 4.6% compared to a year ago, while the average selling price decreased slightly by 0.8% to $1,074,425 

“The Bank of Canada’s rate cut announced on September 4 will lead to a further improvement in affordability, especially for those using variable rate mortgages. First-time buyers are especially sensitive to changes in borrowing costs. As mortgage rates continue to trend lower this year and next, we should experience an uptick in first-time buying activity, including in the condo market” predicts Toronto Regional Real Estate Board President Jennifer Pearce.

TRREB reported 4,975 home sales in August 2024 – down by 5.3 per cent compared to 5,251 sales reported in August 2023. New listings entered into the MLS® system amounted to 12,547 – up by 1.5 per cent year-over-year. On a seasonally adjusted basis, August sales edged up on a monthly basis compared to July, whereas new listings were down slightly compared to the previous month.

Looking ahead, while more buyers may enter the market as rates continue to decrease, it may take time for the existing inventory to be absorbed, suggesting a gradual recovery phase.
 

Monthly Discussion - Pricing Strategies

Setting an accurate asking price for a resale home is crucial, especially in a market that is leaning from more or less balanced market, toward a Buyer's market. In such conditions, Buyers have more options and greater leverage, so pricing a property correctly from the start can make all the difference. An overly ambitious asking price can deter potential buyers, causing the property to sit on the market longer. When a home remains unsold for an extended period, it can create the impression that there is something wrong with the property, further diminishing its appeal (often considered a phantom stigma!). This often forces sellers to make price reductions, which can weaken their negotiating position and reduce their overall return. 

➤ We've been watching a couple of improperly priced properties through to their ultimate sale, and can easily say these Sellers have lost between $25,000-$30,000 of value, due to ill-advised marketing foolery 🤯!   We aren't in a market where you can just guess at a price - do the homework, and price to what the market will bear.

In the Toronto market today, we are seeing around 25% of listings are getting 're-listed' within 30 days with a new price & strategy.  A poorly priced home can quickly become stale and extend its days on the market unnecessarily, not only increasing carrying costs for the Seller but also decreasing Buyer interest - properties that have been on the market longer are often perceived as less desirable.

➤ To avoid this cycle, setting a competitive and realistic asking price based on comparable sales and current market trends is essential. Coupled with a strong marketing strategy, accurate pricing helps attract serious buyers quickly, reduces the time on the market, and ultimately leads to a more successful sale, and hopefully, an extra $30,000 in your pocket! 

New Listings vs. Re-Listings - August 2024
 

A few samples of listing data from around the GTA for the month of August:

The average days-on-market fluctuates with the area, but we are typically seeing around 26-35 days for 'well priced' properties, and 46-65 days for ones with what we would call 'creative pricing'.  Generally speaking, the marketing strategy of marketing at a very reduced (under-market value) price point, and 'holding of offers' for a specific day, has had limited success -- most Buyers are simply waiting-out the Sellers, and hence why we see such a significant number of re-listings around the GTA. 
 

Moral of the story - get it priced right, right from the beginning!

Bank of Canada maintains overnight rate

Wednesday April 10, 2024 - OTTAWA The Bank of Canada has maintained its overnight rate target at 5%, with the Bank Rate at 5¼% and the deposit rate at 5%. The Bank expects the global economy to continue growing at a rate of about 3%, with inflation in most advanced economies easing gradually. The US economy has proven stronger than anticipated, buoyed by resilient consumption and robust business and government spending.

One key cause for concern is a housing market that's showing signs of heating up. The benchmark average home price in Canada is down more than 17 per cent from its peak in 2022. But the numbers for December and January indicate the market may have bottomed out and started to rebound.

The Bank has revised its forecast for global GDP growth to 2.7% in 2024 and about 3% in 2025 and 2026. Inflation rates are projected to reach central bank targets in 2025. In Canada, economic growth stalled in the second half of last year and the economy moved into excess supply.

Interest Rate Talk

In recent years, interest rates in Canada have remained historically low. However, it's important to note that interest rates are subject to fluctuations based on various factors, including the overall economic conditions and monetary policy decisions made by the central bank, the Bank of Canada.  We’ve seen the BOC continue to put upward pressure on interest rates, with continual 0.25 point increases, with most factors pointing to another raise in rates in July.

While interest rates have a profound impact on multiple sectors, they are particularly significant for the real estate market.

Mortgage Affordability:

When interest rates are low, homebuyers can benefit from lower borrowing costs. This can increase affordability and incentivize prospective buyers to enter the market or consider purchasing higher-priced properties. Lower interest rates translate into lower monthly mortgage payments, making homeownership more accessible to a broader range of individuals and potentially driving up demand in the GTA.

Demand and Property Values:

Low interest rates can fuel demand in the real estate market. As more buyers enter the market, the demand for properties increases, leading to rising property values. This can be positive for homeowners, as it can contribute to equity growth and increased net worth.

Housing Market Stability:

While low interest rates can stimulate the real estate market, a sudden and significant increase in interest rates could have the opposite effect. Higher borrowing costs may reduce affordability, which can lead to a decline in demand and a potential slowdown in the housing market. Homeowners looking to sell their properties might face challenges if the market experiences a shift in buyer sentiment due to increased interest rates.

Rental Market:

Interest rate trends can also impact the rental market significantly. Higher interest rates can increase borrowing costs for real estate investors, affecting their profitability and returns. If investors find it less lucrative to purchase properties for rental purposes, the rental market may experience reduced supply, potentially leading to increased rental prices – which is the trend we are seeing all around Toronto and the GTA, with record-high rental prices.

Interest rate trends have a significant influence on the real estate market in the Greater Toronto Area. Low interest rates have contributed to increased affordability, rising property values, and a robust housing market. However, it's important to remember that interest rates are subject to change based on economic conditions and policy decisions. As a result, prospective homebuyers, homeowners, and real estate investors should closely monitor interest rate trends to make informed decisions. Consulting with mortgage professionals and real estate agents can provide valuable insights into the potential impact of interest rate changes on the GTA real estate market.