Chief economist underlines highly regional nature of Canadian market as 2026 looms
Affordability challenges, continuing economic uncertainty and ongoing trade tensions with the US mean Canada’s housing market isn’t exactly set to roar into life in 2026 – but there’s room for some optimism for market watchers with the new year in sight.
The Bank of Canada rounded off 2025 with an interest rate hold on December 10 and doesn’t seem to be contemplating deep cuts in the coming months.
On the surface, that could mean bad news for hopeful buyers locked out of the market because of affordability struggles. But others in a position to buy, who’ve been adopting a wait-and-see approach in case rates move lower, may decide now is the time to push ahead.
“I think in a way, stability at low rates is not a bad thing for the housing market,” Bank of Montreal (BMO) chief economist Doug Porter (pictured top) told Canadian Mortgage Professional.
“I do think some buyers were holding off in hopes of even lower rates. So with a bit more clarity on rates – not absolute clarity by any means, but a bit more clarity – I actually tend to think that could help the housing market.”
BoC on hold after significant rate relief
Since the middle of last year, the central bank’s benchmark rate – which heavily influences variable mortgage rates and home equity lines of credit (HELOCs) – has more than halved, falling from 5% in June 2024 to 2.25% by the end of 2025.
That means the picture is generally brighter for homebuyers looking into the new year, Porter said, even though much will depend on whether Canadian and US negotiators can strike a deal to end the tariff dispute that’s rumbled on since Donald Trump took office in January.
Tiff Macklem, governor of the Bank of Canada, says the benchmark rate at 2.25% is “about the right level” to support modest growth while keeping inflation near target, despite trade-related uncertainties. https://t.co/S6UDcxRehn
— Canadian Mortgage Professional Magazine (@CMPmagazine) December 17, 2025
“We’ve had a lot of rate relief over the last 18 months,” he said, “one of the biggest cutting cycles we’ve seen in such a short period of time. I do think that will flow through and help the market. What the housing market really needs is some clarity on the trade front.
“We don’t need this uncertainty hanging over us for an extended period of time. And I’m a bit concerned on that front that we’re not going to get a lot of clarity on trade. So I’m still a bit cautious on the housing market. I think it will defrost a bit next year, but that doesn’t mean it’s going to get hot. I think it’ll do a little bit better in 2026, but I wouldn’t expect a really strong market.”
Regional outlooks differ sharply
What homebuyers and housing professionals can expect from the market next year largely depends on what part of the country they’re based in. It’s always been the case that Canada’s housing market outlook isn’t a uniformly national one, with sharp differences from one market to the next.
This year, for instance, Ontario and British Columbia – two provinces that saw red-hot homebuying activity during the COVID-19 pandemic – experienced sluggish sales and worsening condo market crises, while the Atlantic provinces and Quebec (among others) enjoyed relatively healthy markets.
“There really is not a national housing market. There never is,” Porter said. “But it’s more split than we’ve seen in quite a long time. Southern Ontario is really struggling, as are parts of BC.
“But most of the rest of the country actually held up quite well and probably will do just fine in the year ahead. But I am concerned that Ontario is going to continue to struggle because it’s still very highly priced, and it’s not affordable. And Ontario is probably facing the greatest strains from the trade uncertainty with the US because of its industrial structure.”
BoC rate hikes unlikely for now
Affordability will remain much further out of reach for certain markets compared with others. But the good news on the interest rate front is that while the Bank of Canada seems to be done with cuts for now, rate hikes don’t look likely either.
Expectations have risen for other central banks, most notably the Reserve Bank of Australia, to increase rates soon. But Porter said other economies such as Australia are in a “different world” to Canada, particularly because US trade is a far bigger driver of the Canadian economy than it is for other countries.
“We still have this really dark cloud of USMCA [the US-Mexico-Canada Agreement, set for review in 2026] uncertainty hanging over us,” he said. “And until that dissipates, I think it’s kind of farfetched to be talking about rate hikes in Canada.”
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