CIBC leaders sketched a long pause on rates and a slow thaw for housing
Canada’s mortgage industry enters 2026 with financial markets flirting with the idea of another Bank of Canada hike – but CIBC’s top economists argued that scenario still sits far off, even as housing remains stuck in a painful reset.
Speaking on CIBC Capital Markets’ Eyes on the Economy podcast, chief economist Avery Shenfeld and deputy chief economist Benjamin Tal framed 2026 as a transition year, with inflation risks easing and homebuilding too weak to repair deep affordability strains.
Cost-push fears seen as overstated
Shenfeld pushed back against the view that tariffs and shifting trade patterns would reignite cost-push inflation and force the central bank’s hand.
He pointed to muted import prices for consumer goods, including autos, despite United States tariff moves, and noted that recent increases in Canada’s industrial product price index stemmed largely from gold and meat rather than items in the consumer basket.
“It does not appear to us based on the paper we wrote that cost push inflation is likely to be a serious issue either now or looking ahead into 2026,” Shenfeld said.
He added that recent GDP revisions reflected stronger productivity rather than an overheated labour market, leaving “roughly the same amount of slack” in the economy.
BMO chief economist Doug Porter, meanwhile, described a 2026 hike as a “distant prospect” and said the Bank looks more likely to hold than to raise rates after ending 2025 at 2.25%. Porter and other forecasters saw the most probable path as a lengthy pause through 2026 following 100 basis points of cuts in 2025.
Housing seen as too costly to buy, too weak to build
Tal turned to housing, stressing regional splits: Alberta and Atlantic Canada have held up, while Ontario and British Columbia are “actually in a housing market recession.”
Permits and new home sales have dropped “dramatically” across provinces, he said, as economic uncertainty and slower population growth weigh on demand.
“I think that the best way to describe the housing market in general is that it’s too expensive to buy, not expensive enough to build. The market is broken, the market is frozen,” Tal said.
A new Fraser Institute study warns that homeownership is increasingly out of reach for median-income families in every major Canadian city, with down payments and mortgage costs surging far beyond income growthhttps://t.co/LQ0xbRoJV1
— Canadian Mortgage Professional Magazine (@CMPmagazine) December 9, 2025
He warned that condo prices in Ontario have already fallen about 22% from peak and could slide another 10 to 15% before the market cleared, with construction “basically zip now” and a recovery in building likely pushed out to 2028 or 2029.
Tal also questioned official inflation data, arguing that Statistics Canada’s estimate of roughly 5% rent inflation clashes with negative asking-rent trends and record-low turnover.
Doubling up today, demand shock tomorrow
Tal highlighted doubling up – multiple families sharing one home – as a hidden pressure valve in the affordability crisis.
As prices fall and affordability improves, he expected “un-doubling” to unleash another wave of demand on top of immigration and household formation.
Looking ahead, Tal said he views 2026 as a bridge from “a bad situation and a much better situation,” with a weak first half for housing starts and a firmer second half as low rates, fiscal support and reduced political uncertainty gradually rebuilds confidence.
Joel Fox, chief operating officer of digital real estate platform Ownright, previously said that buyer nerves and “emotional risk” now weigh more heavily on activity than headline mortgage rates.
“A rate hold confirms what we’ve been seeing for months: interest rates aren’t the barrier anymore. Prices have already come down from their peaks, but buyers remain cautious because they’re unsure about the long-term value of their purchase. People worry more about overpaying or losing equity than they do about an extra few dollars on monthly interest,” Fox said.
“Realtors and lenders are entering a new phase where the non-financial side of homebuying matters more than the price tag. Buyers want transparency, clear communication, realistic valuations, and guidance that helps them understand the risks, not just the costs."
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