Business · Economy · 8 hrs ago
Rising rate-hike expectations add pressure to Canada's weak housing market
More economists and traders expect the Bank of Canada to raise rates next week as inflation concerns grow.
The bank has held its policy rate at 2.25 per cent since a cut in October 2025, and had not raised rates since July 2023.
Its decision is expected on Oct.
28, though a hold is still widely predicted.
Higher rates would immediately increase payments for variable-rate mortgages and raise rates on new fixed mortgages.
Fewer buyers may qualify for loans, giving eligible buyers more leverage and potentially pushing home prices lower.
Canada's housing market is already under strain, with home sales at a 25-year low and the national real estate association lowering its 2026 sales forecast for a third straight quarter.
A rate increase could deepen that slowdown, while elevated energy prices and stubborn inflation are among the concerns facing the bank.
The bank has warned it may need to raise borrowing costs if energy prices remain high.
More economists and traders expect the Bank of Canada to raise interest rates next week as inflation expectations rise.
A hike would add pressure to Canada's weak housing market, with variable mortgage payments rising and fewer buyers able to qualify for financing.
The central bank's policy rate has been 2.25 per cent since a quarter-point cut in October 2025.
National home sales are at a 25-year low, and an industry forecast projects 444,530 sales in 2026, down 5.2 per cent from 2025.
The Bank of Canada has not raised rates since July 2023, and an eighth consecutive hold was widely predicted.
- Who
- The Bank of Canada is weighing its interest-rate decision. Economists and traders are increasingly expecting a hike.
- What
- Expectations of a rate hike are rising, raising concerns about added pressure on Canada's weak housing market.
- When
- The rate decision is expected next week, on Oct. 28.
- Where
- Canada.
- Why
- Inflation expectations have risen, and the central bank has warned it may need to raise borrowing costs if energy prices remain elevated.
Rate-hike expectations
Expectations of a hold
Aspect
Rate-hike expectations
More economists and traders expect the Bank of Canada to raise rates, with inflation expectations rising.
Expectations of a hold
An eighth consecutive hold was widely predicted.
Aspect
Rate-hike expectations
A hike could help tamp down stubborn inflation.
Expectations of a hold
A hold would avoid immediately increasing variable mortgage payments and rates for new fixed mortgages.
The Bank of Canada last raised interest rates.
The Bank of Canada cut its policy rate by a quarter point to 2.25 per cent.
The Canadian Real Estate Association lowered its 2026 home sales forecast for a third consecutive quarter.
Governor Tiff Macklem said there was no resolution in sight for the Middle East conflict affecting global energy markets.
The Bank of Canada is expected to announce its next rate decision.
- Policy rate
- 2.25 per cent
- Last rate increase
- July 2023
- Next rate decision
- Oct. 28
- 2026 home sales forecast
- 444,530 homes
- Forecast change
- 5.2 per cent below 2025 sales
5 sources
Housing market 'on its knees' as odds of Bank of Canada rate hike rise
Traders, Economists Boost Bets on Canada Rate Hike Next Week
Canada’s housing market takes 'step back’ amid higher mortgage rates
What people are saying
The housing market is kind of on its knees right now, and rising rates is like tossing a drowning guy an anchor
unbelievably weak across the country
no resolution in sight for the conflict in the Middle East