Rate hike slams brakes on GTA housing recovery: TRREB
· Toronto Sun
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OTTAWA – It’s not going to ease the pressure.
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In the wake of the Bank of Canada raising the key lending rate on Wednesday , stakeholders say the move slams the brakes on what’s been a slow and steady recovery in housing affordability across the Greater Toronto Area.
“If you think about the peak of the Bank of Canada’s interest rate tightening cycle, we are looking at a household income required to purchase the average home in the GTA approaching $200,000, which wasn’t sustainable from an affordability perspective,” Jason Mercer, of the Toronto Regional Real Estate Board (TRREB), told the Toronto Sun .
Central bank hikes rates for first time in three years
On Wednesday, the Bank of Canada hiked its overnight rate by 25 basis points to 2.5% – the first time the central bank raised rates since July 2023.
The bank had held rates at 2.25% over the past year as officials considered their options amid the ongoing affordability crisis, conflict in the Persian Gulf and skyrocketing energy prices.
“With the outlook for inflation substantially higher and the economy showing resilience, an increase in the policy rate is needed to reduce the risk that elevated energy prices could spill over and become generalized inflation,” Bank of Canada Governor Tiff Macklem told reporters Wednesday.
“There could be a need to raise the policy rate further, but given the uncertainties, we will proceed carefully.”
Macklem warned the fourth quarter will likely show slower growth as “new U.S. tariffs weigh on activity.”
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Inflation in Canada continues to be on the rise.
Earlier this month, Statistics Canada pegged year-over-year Consumer Price Index (CPI) growth at 3.1% – a number that’s up from 3% in August.
On Wednesday, the Bank of Canada also raised its 2027 inflation forecast to 3.1%, up from its July prediction of 2%.
The Bank of Canada’s next rate announcement is set for Dec. 9.
GTA home sales remain sluggish
Mercer said even the mere suggestion of a hike has hit local housing markets, explaining that fixed mortgage rates have climbed for months in anticipation of the central bank’s move, though falling average selling prices have helped soften the blow.
Home sales in the GTA, Mercer said, remain sluggish.
“We’ve been trending between 60,000 and 70,000 over the last three years,” he said.
“In a ‘normal year,’ given where the population stands today, it would be reasonable to see somewhere in the neighbourhood of 100,000 transactions, so certainly we’ve seen a pullback in sales.”
Even with affordability improving throughout 2026, he explained, the industry hasn’t seen much movement on the sales front – due largely to Canadians concerned over their employment and income situation, as well as increasing tensions with the U.S.
If predictions about further hikes come to pass, buyers will likely weigh mortgage payments against their income and rethink their purchasing options.
Others, he said, will put their home buying plans on hold altogether.
“I don’t envy their position in terms of balancing the inflationary impact of energy prices versus the potential negative impact of our trade relationship on the economy,” Mercer said of the Bank of Canada.