Real estate professionals said they are hoping the Bank of Canada's decision to hold its policy interest rate at 2.25% will keep borrowing costs steady as the economy adjusts to slower growth and ongoing trade uncertainty.
In its statement, the Bank said the current stance reflects an economy where “uncertainty is heightened, and we are monitoring risks closely.”
For real estate investors, stabilized interest costs come as Toronto new‑condo sales have fallen sharply from their peaks in 2021 and 2022, and Vancouver has seen a similar pullback. Inventories of unsold units in both cities have climbed, and developers have slowed or paused projects amid high financing costs and cooling pre‑construction activity.
The top executive of real estate services firm Royal LePage said the Bank’s latest move brings borrowing costs back into a more typical range.
“Rates have moved back toward a more neutral setting, neither stimulating nor acting as a drag on economic activity. That’s a return to more normal conditions. Rates can still move modestly in either direction depending on how the economy evolves, but the most likely scenario is a period of stability,” said Phil Soper, the firm's president and CEO, in an email.
He added that stability in borrowing costs is especially important for homebuyers and households facing mortgage renewals because it “provides greater certainty around financing costs and allows households to make housing decisions based on need and affordability, rather than trying to time interest rate moves.”
CoStar market analyst Benjamin Haythornthwaite said the Bank’s decision reflects a careful balancing of two risks. "Underlying inflation pressures haven’t cooled enough to justify cuts. At the same time, financial conditions remain restrictive overall, and demand is soft enough that further hikes aren’t warranted."
He added that, "consistent with prior guidance, the Bank will move only on a material, data‑verified shift in the inflation outlook or economic slack. Holding steady preserves flexibility as incoming data test whether disinflation is durable."
Modest economic growth expected
The Bank said economic growth is projected to be modest in the near future as population gains slow and Canada adjusts to more protectionist trade policies implemented by the U.S. It expects consumer spending to hold up and business investment to strengthen gradually, with fiscal policy providing some support.
The Bank projected economic growth of 1.1% in 2026 and 1.5% in 2027, broadly in line with its October outlook. It said the upcoming review of the Canada‑United States‑Mexico Agreement remains a key source of uncertainty.
The Bank said it expects inflation to stay close to the 2% target over the projection period, with trade‑related cost pressures offset by excess supply. It noted that inflation was 2.1% in 2025 and that underlying price trends have continued to cool.
Mark Fieder, principal and president at real estate services firm Avison Young Canada, said the rate decision was expected "in light of inflation ticking upward. I anticipate we will see a continued hold on the overnight rate for the foreseeable future, taking us toward the later part of 2026."
He added that more stability in the five‑year Government of Canada bond should help lenders set fixed mortgage rates with greater confidence.
The current interest rate environment should benefit commercial real estate through the year, “because there's a big operational element to it,” Fred Cassano, a tax partner and national leader of accounting and professional services firm PwC’s real estate practice, told CoStar News. He added that high-end offices and industrial real estate should perform strongly.
Monitoring economic shifts
Daniel Foch, chief real estate officer at the Valery.ca real estate brokerage, noted that Canada’s tenuous relationship with the United States, its largest trade partner, remains a wild card, and more economic information is needed about the shifting economy.
“I think most Canadians’ lived experiences show we’re in a recession, so it’s only a matter of time before we have enough data that shows us that the economy needs downside rates,” Foch said in an interview.
Dominic St‑Pierre, executive vice president of business development at Royal LePage, told CoStar News that "we believe interest rates have reached their low point.”
The hold on rates comes as Canada faces mounting pressure to increase housing supply. Federal studies have estimated the country needs between 3.2 million and 5 million additional homes over the next decade, depending on how housing need is defined.
Large redevelopment efforts in Montreal, Toronto and Vancouver have been slowed by years of consultations, rezoning and planning work, and higher vacancy rates in 2025 have made some developers more cautious about launching new projects.
Rising costs and weaker near‑term returns have also held back construction activity. National housing starts fell from more than 280,000 units in June to about 230,000 by October, well below the pace required to meet long‑term supply targets.
Developers face higher municipal fees, elevated construction costs and shifting demand patterns, all of which have made new projects harder to advance even as policymakers call for more homes.