The Bank of Canada’s decision to hold its key interest rate at 5% this week came as no surprise to most of us in the business and real estate world. What is surprising—or at least notable—is how little impact this move is likely to have in the short term on Canada’s sluggish housing market.
As someone who works closely with investors, operators, and clients buying and selling in this environment, I’m seeing firsthand what the data doesn’t always show: confidence is low, liquidity is tightening, and many are staying on the sidelines.
A Market on Pause
Let’s call it what it is—the housing market, especially in regions like the GTA, is in a holding pattern. Sales volumes are down, listings have slowed, and pricing remains choppy. People aren’t eager to make big decisions in a climate where they don’t feel secure about tomorrow.
In past cycles, a rate hold—or even a whisper of a coming cut—might have been enough to stir the pot. But not this time. Why? Because the issue isn’t just monetary policy anymore. It’s layered. Deep affordability issues, economic uncertainty, and shaky consumer sentiment are all working together to keep things frozen.
Confidence, Not Just Rates, Is the Real Lever
Rates influence behaviour, but confidence drives it. People are doing the math and realising that even with rate stability, mortgage payments are still historically high. And with job growth softening and inflation not quite tamed, the sense is: “Why rush?”
From conversations I’ve had recently, even investors with dry powder are choosing to wait. Not because they don’t believe in the fundamentals—but because they want to see where things are going before they deploy capital.
A Reality Check on Rate Cuts
There’s chatter now about rate cuts possibly coming later this year, and that’s something to watch. But even if the Bank of Canada trims rates by 25 or 50 basis points, that doesn’t mean the floodgates will open. These moves may offer symbolic reassurance, but structurally, the market needs more support—on affordability, inventory, and buyer protection—to really pick up steam.
And let’s not forget: some of the pressure in the system is also coming from stress-tested lending guidelines, broader fiscal policies, and insurance premiums, not just the policy rate.
What Needs to Happen Next
If we want to see activity resume in a meaningful way, it’s going to take more than a single policy signal. Here’s what I believe needs to happen:
- Government leadership on affordability: Real housing supply strategies, not just headlines. We need zoning reform, faster permitting, and incentives for purpose-built rentals.
- Improved transparency for buyers and sellers: People need to feel safe making big decisions again. That means honest guidance, real economic outlooks, and less noise.
- Targeted financial innovation: Creative ownership structures, smarter debt instruments, and co-investment models can help bridge the gap between affordability and aspiration.
Final Thoughts
In my work, I often say: capital follows clarity. And right now, there’s not a lot of clarity in the market. Until there is—until people feel like they understand the risks and see a pathway to reasonable returns—don’t expect a major turnaround, even if the central bank starts cutting.
The good news? Change is coming. The question is whether we’ll be ready to move when it does.