A cooler market and falling interest rates are unlocking doors that had long been shut in housing, a senior BMO economist said
Plenty of major housing markets are slowing across Canada – but that cooldown is presenting some of the best purchasing opportunities for buyers seen in decades, according to a prominent Bank of Montreal (BMO) economist.
Home sales in pricy markets like Toronto and Vancouver tumbled last month, posting big double-digit drops over the same time in 2024, as uncertainty about the likely effect of Donald Trump’s trade war continues to cloud the outlook for Canadian homebuying.
The market’s current slump won’t last forever, Sal Guatieri (pictured top), senior economist and managing director at BMO said on Thursday. But falling prices and milder competition mean the present market offers “the best time to buy since the early 1990s,” he said, especially in Toronto.
Canada’s housing situation is currently a tale of two markets: rapidly cooling activity in Ontario and British Columbia, and slightly better outlooks in other provinces. In Ontario and BC, where prices skyrocketed during the COVID-19 pandemic and froze scores of buyers out of the market, windows of opportunity are finally opening.
“In 2022, affordability was the worst in a generation,” Guatieri told an audience at the Canadian Alternative Mortgage Lenders Association (CAMLA) expo in Brampton, Ontario, held May 8. “You really had to go back to the early 1990s and double-digit mortgage rates. There’s been a lot of progress since [2022].
“Why? Because house prices came down a lot in Southern Ontario and Greater Toronto. Less so in British Columbia, but mortgage rates are down above two percentage points. Affordability is improved. Even though we’re not all the way back to normal or healthy levels of affordability, we’re getting there.”
Greater Toronto Area (GTA) home sales tumbled in April, plunging by 23.3% compared with the same time last year – and a flood of new listings saw prices dip as economic uncertainty and tariff fears continue to grip homebuyers.https://t.co/dhenMQKxLg
— Canadian Mortgage Professional Magazine (@CMPmagazine) May 6, 2025
Expect further BoC rate cuts between now and the end of the year
While the Bank of Canada has slashed rates since the middle of last year, cutting its benchmark rate seven times and reducing from 5.0% to 2.75%, Guatieri said further reductions are necessary to continue improving the affordability outlook for Canadian buyers.
The good news is that it looks set to resume those cuts after hitting pause in April, especially if inflation continues to float around the Bank’s target rate of 2%. If the trade war persists at its current level, inflation is unlikely to spike dramatically, according to Guatieri – and to nowhere near the levels seen in the middle of 2022, when it ballooned to a 39-year high of 8.1%.
“I know there have been some counter-tariffs applied on American shipments to Canada but even those were much lighter than was initially planned by the Canadian government,” he said. “So they might push up inflation modestly, and some food products in particular, but it’s not going to be a repeat of 2022.”
Trade negotiation progress could improve the housing outlook
Much will depend on the length and severity of the trade war, with the unpredictability of the Trump administration in Washington continuing to cast a huge shadow over the employment and economic outlook for plenty of Canadians.
That means despite opportunities for some hopeful homebuyers, they are still sitting on the sidelines as they take a wait-and-see approach to the Trump tariffs and how they’ll impact the economy.
“The trade war has almost paralyzed Canadian businesses. They just don’t know whether they should invest,” Guatieri said. “We’re seeing, in the housing market, potential homebuyers fearing possible loss of their jobs and standing back – not willing to take the plunge after such a big investment as a home purchase.”
But Trump, after much grandstanding, finally struck his first deal of the new tariff era on Wednesday morning by announcing an agreement with the United Kingdom, and Guatieri sounded a hopeful note on a possible ramping-down of the trade war in the weeks and months ahead. “Hopefully, after the renegotiation of the free trade agreement, a lot of that [housing] uncertainty will dissipate also,” he said.
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