Market Insight for December 12

On Wednesday, the Bank of Canada confirmed it is keeping its key interest rate unchanged after a year marked by substantial rate cuts. According to economists and realtors, this pause may encourage both sides of the market to return after months of sitting tight.

The central bank left its overnight rate at 2.25 per cent, and most economists anticipate it will stay at this level for several months.

Bank of Canada Governor Tiff Macklem said the rate hold is in line with inflation close to two per cent.

At a press conference, Carolyn Rogers, the Bank of Canada’s senior deputy governor, said she expects to see “a better balance in the housing market” between sales activity and new listings.

 She added that the bank does not “expect another surge in house prices,” though “a continued correction in some of the higher-price markets” remains possible.

A stable rate environment often sparks renewed market activity, especially after a stretch of volatility and shifting expectations. During the rate-cutting phase, many buyers held back, hoping for even lower borrowing costs, while sellers hesitated in case more cuts triggered stronger demand.

Canadian home sales have climbed steadily in recent months but still trail 2024 levels. In October, 40,423 properties traded hands across the country, a 0.9-per-cent rise from September but still 4.3 per cent below October 2024, according to the Canadian Real Estate Association. New listings dipped 1.4 per cent to 77,479 units from September to October.

With rates now on pause, both sides of the market may feel more assured moving forward.

This could support an upward trend in sales, though more transactions do not necessarily translate into higher prices. Values may still edge downward even as activity picks up.

Many sellers are coming to terms with today’s pricing reality. Those hoping to cash out at peak values may need to wait a few more years before achieving their ideal number.

Benjamin Tal, deputy chief economist at CIBC, noted that while a rate hold could entice some buyers back, overall housing activity will ultimately hinge on whether Canadians feel secure about the broader economic outlook.

“We are in a stable environment for mortgage rates,” he said, adding that he expects rates to remain steady until 2027.

However, he emphasized that interest rates are “secondary” in driving market shifts. The job market and consumer confidence will heavily influence whether people choose to buy or sell.

A recent Bank of Nova Scotia survey showed that 62 per cent of prospective buyers feel economic uncertainty is weighing on their finances and delaying home-buying plans.

Realtors on the ground report the same pattern: both buyers and sellers have been reluctant, waiting for clearer signs of improvement. With the central bank projecting rate stability, some may finally decide to proceed, recognizing that borrowing costs are unlikely to become much more favourable.

For those looking to secure financing, it’s important to consider whether a variable rate is worth the potential fluctuations. Fixed mortgage rates are also still very competitively priced, though they are now facing upward pressure as bond yields climb.

At the moment the best mortgage choice depends on individual risk tolerance. Variable rates are still lower, around 3.40 per cent to 3.45 per cent and offer possible savings if rates fall, while 5-year fixed rates are about 3.89 per cent which provide predictable payments and remain popular for their stability.