The Bank of Canada announced another rate hold Sept. 2, locking in 2.25% interest rates for another month. This decision furthers the BoC’s delicate balancing act of weighing domestic conditions against international economic risks.
The Canadian Real Estate Association’s most recent report shows that home sales grew across Canada for the fourth consecutive month in July. Continuing to hold at this lower rate means the stage is set for momentum to keep building for home sales this fall–but that’s only if economic conditions hold.
“The escalating trade war could put the housing market’s recovery back on hold, as heightened economic uncertainty may prompt both buyers and sellers to take a wait-and-see approach,” said Jamie David, vice president of mortgages at Ratehub.ca. “We saw a similar dynamic when tariffs were first introduced last year, with Canadian home sales falling 9.8% month-over-month in February 2025, the largest monthly decline since May 2022, as buyers pulled back from the market.”
National figures aren’t the whole story, though. There are some markets firmly in buyer-friendly territory, while others see sales and inventory normalize, according to CREA. This means the impact of a rate hold on fall activity is likely to vary by province and the local market.
Housing Market Conditions Stable Heading Into the Fall
Current conditions have led to improvements on several fronts in Canadian real estate so far in 2026. Home sales were up 0.5% month over month in July, while prices increased 0.2%. Despite monthly growth, however, these numbers fall short when it comes to year-over-year sales growth, which decreased 5.3%.
A drop in new listings and an increase in sales pushed the sales-to-new-listings ratio from 50.2% in June up to 51.3% in July, with values between 45% and 65% considered balanced. Overall, CREA data shows several regions are inching toward balanced market conditions, which could bring more buyers into the fold this fall.
Taken together, this means the BoC’s current approach is leading to a slow but steady recovery in the housing market–but right now it’s unclear if that will continue as inflation and global conflict remain uncertain.
Inflation and Uncertainty Rebound Amid Ongoing Conflict
The Consumer Price Index increased by 3% year over year in July, marking a slight increase in the average amount Canadians pay for goods and services. This came on the heels of a 2.8% increase in June and a 3.2% increase in May.
Gasoline prices specifically are growing at a faster rate due to ongoing conflict in the Middle East, with July’s year-over-year change of 25.7% beating out June’s increase of 20.5%.
At the domestic level, employment across Canada increased 0.4% in July, while the unemployment rate declined 0.1%, according to Statistics Canada. At the same time, Gross Domestic Product growth increased about 1.7% in May, which is the latest available data.
For the BoC, this paints a complex dilemma: weighing the improvement of certain conditions at home with quickly evolving events at the international level.
“With July CPI rising to 3.0%, from 2.8%, policymakers have little reason to consider a cut,” David said. “The Bank is currently in a bind, with escalating trade tensions threatening to slow economic growth, while inflationary pressures weigh against any easing.”
The BoC has previously indicated it expects inflation to gradually move back toward its 2% target, but that depends partially on oil and gas prices. This leaves fall rates sensitive to incoming inflation, employment and economic growth data.
What A Rate Hold Means For You
The BoC’s 2.5% rate hold influences the prime rate, or the rate banks charge their most creditworthy customers. Since the rate cut in October 2025, the prime rate has been 4.45%–the lowest it’s been since August 2022.
Here’s how that impacts the housing market:
- For homebuyers: A steady prime rate means you can know what to expect from banks and mortgage lenders when applying for a mortgage. Buyers who have been waiting for borrowing costs to drop further may need to view the current rate as their baseline for purchasing decisions.
- For sellers: A stable rate environment may provide more confidence that buyer demand will not weaken due to unexpected borrowing cost increases.
- For homeowners: For those with variable mortgages, holding rates means stability in monthly payments.
Looking Ahead: Future Rate Considerations
The Bank of Canada’s latest Market Participants Survey, released July 27, expects rates to increase in 2027. The survey found that the median forecast among respondents put the policy rate at 2.5% starting in March, followed by 2.75% in Q3.
On the buyer side, this could result in higher prime interest rates, and therefore more interest paid over the life of their mortgage loan. For variable-rate mortgage holders who depend on the prime rate for their payments, this could also mean higher monthly payments.
Even so, a rate increase in 2027 doesn’t necessarily mean the housing market will weaken, especially if higher rates are joined by strong economic growth at the local level.
For the fall, the question comes down to whether buyers and sellers are able to adjust to the current state of the market. Following several months of rate holds, this could be a test of whether Canada’s housing market can sustain its current momentum without additional rate changes in the face of uncertainty.
“For Canadians shopping for a home or approaching a mortgage renewal, getting a rate hold is a strategic move amid the current market volatility,” David said. “A rate hold can protect you from potential rate increases for up to 120 days, providing security while the outlook for mortgage rates remains uncertain.”
For those looking to buy a home, this means there’s no time like the present. Reach out to Zoocasa today to connect with an agent in your area.
