Bank of Canada Holds Rates: What It Means for Real Estate

The Bank of Canada held its overnight lending rate this week—a decision that surprised few observers. Core inflation has cooled to an average of 2.6%, well within the target range, while Real GDP remained flat in November (+0.0%). With inflation under control and the economy stable, the BoC’s decision to hold rates was straightforward. However, uncertainty dominated Wednesday’s rate statement and press conference. While many banks expect rates to remain steady through year-end, several indicators suggest further rate cuts may be coming. 

Canada’s Employment Picture Remains Weak 

The job market has more slack than the Labour Force Survey suggests. Employment insurance claims jumped 5.9% month-over-month and are up 16% year-over-year. Total payroll employment now sits below year-ago levels—the first non-recessionary annual decline since the dataset began in 2001. The recent Business Outlook Survey shows businesses expect to cut payroll at the highest rate in 10 years. 

Reports indicate nearly 10,000 federal workers received potential layoff notices last week. This matters because payroll employment excluding public sector administration is at its lowest non-recessionary level on record, while public sector employment has reached 25-year highs.

Mortgage Payment Pressures Are Mounting

The Mortgage Renewal Wall is reaching its peak this year. Approximately 60% of all outstanding Canadian mortgages will renew in 2025 and 2026—one of the largest renewal waves in history. In 2026 alone, roughly 1 million mortgages are scheduled for renewal. Most borrowers will face payment increases of 10% to 20% or more, pulling spending away from disposable income—assuming households can absorb the increase at all. Mortgage delinquencies have risen 7% nationally over the past three months, according to the Canadian Bankers Association.

The Canadian economy will struggle this year as trade negotiations with our largest trading partner remain unresolved. Production, investment, and trade are unlikely to pick up soon. We expect additional rate cuts later this year.

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