Chief economist says buyers will likely benefit from rate stability, even if a market boom isn’t ahead
The Bank of Canada surprised nobody with its decision to leave interest rates untouched on Wednesday, giving little indication that it’ll be in a mood to begin cutting again anytime soon.
The announcement strengthened expectations that the central bank will remain on a prolonged pause in the opening months of the year as it keeps a close eye on the ongoing effects of US trade policy on the Canadian economy.
That might be seen as bad news for homebuyers and owners who’d hoped borrowing costs would fall even further in 2026.
But housing market watchers may also find a glimmer of good news in the central bank stepping to the sidelines, according to Bank of Montreal (BMO) chief economist Doug Porter (pictured top): namely, a growing confidence that rates won’t see big upward or downward swings in the months ahead.
“There is a bit of a silver lining here in terms of the fact that the Bank of Canada seems to have settled at these rates,” Porter told Canadian Mortgage Professional. “It does give buyers and sellers a bit more certainty on that front even if some buyers might want rates to be even lower.
“At least they know what they’re dealing with, or roughly what they’re dealing with. They probably won’t be thinking, ‘Well, if I wait another six months, rates will be even lower.’ That kind of mindset is probably done now.”
That’s not to say the housing market is in line for a big rebound in 2026. Most of the issues that have weighed it down in recent years aren’t expected to shift in the coming 12 months, and affordability remains stretched for scores of buyers across the country.
Don’t expect fireworks from Canada’s 2026 housing market
BMO’s current official call is for a 1.5% rise in sales across the country – far from a banner year for the national market, Porter said.
“We still think in that environment, prices might drift a little bit lower yet – especially in Ontario and British Columbia,” he said. “The harsh reality is affordability is not back to normal, let alone comfortable, levels.
“And the only levers to move affordability are interest rates, which probably aren’t going anywhere; incomes, which grow very slowly over time; and prices. And prices are the one lever that can still move. We think that prices are likely to drift a little bit lower still this year.”
BoC takes a measured approach after a turbulent fortnight
The Bank’s announcement took place after a bumpy couple of weeks for the global economy marked by tensions over Donald Trump’s Greenland comments and a ramping-up of threats by the US president toward Canada.
Last year, geopolitical strife and US trade policy sent financial markets into a tailspin. But while those factors also had a huge negative impact on homebuyers’ outlook in 2025, Porter doesn’t see them torpedoing the housing market this year.
Some of those troubling headlines, he said, have less impact on the housing market than they might have a year ago. “I think all of us in financial markets, if we’re not completely used to the uncertainty and threats, we’re able to deal with them a little bit more calmly,” he said.
“And I don’t think that alone will really shift the housing market. I think it’s the reality on the ground in terms of rates and what’s going on in the job market that will have a bigger say.”
Bank of Canada governor Tiff Macklem refused to be drawn much on political issues, although he highlighted this year’s upcoming CUSMA (Canada-US-Mexico Agreement) review as an “important risk” to the central bank’s projections for 2026.
For now, Porter saw nothing in Wednesday’s announcement to suggest the Bank is considering changing its current approach.
“In terms of what it means for policy, we’re still of the view that the most likely outcome this year is no change,” he said, “and we’re also of the view that if we’re going to be wrong, it’s more likely that they’ll cut rates rather than raise them this year.”
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