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Canada's Housing Market Faces 14% Sales Decline Amid Tight-Money Policy

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  //house-home.news-articles.net/content/2025/11/1 .. es-14-sales-decline-amid-tight-money-policy.html
  Published in House and Home on Monday, November 17th 2025 at 5:58 GMT by The Globe and Mail

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Canada’s Housing Market in a Tight‑Money Environment – A 2024 Snapshot

The Canadian housing market, long a barometer of economic health, has entered a new chapter as the Bank of Canada (BoC) continues to tighten policy and mortgage rates slip lower than they have in almost a decade. A recent Globe and Mail article (Feb 2024) pulls together data from the Canadian Mortgage and Housing Corporation (CMHC), industry reports, and lender releases to give a clear picture of where prices, sales, and borrowing costs stand today. The following summary distills the key points, offering context from linked sources and a broader understanding of the forces shaping the market.

1. Market Overview: Sales and Prices

• Home‑sales decline: In the first nine months of 2024, Canada saw a 14 % drop in closed residential sales compared with the same period in 2023. The slowdown is most pronounced in the Atlantic provinces and Quebec, while Ontario and the Prairies have posted more modest declines.
• Price trends: The average price for a single‑family home rose to $780 k, a 4 % year‑over‑year increase, but the growth rate has slowed compared with the 8–10 % gains seen in 2022. CMHC’s quarterly report notes that the rate of price appreciation is falling faster in high‑density metros (Toronto, Vancouver) than in secondary cities.
• Housing‑affordability gap: The article highlights that the cost‑to‑income ratio has continued to climb, with the average family spending 32 % of their net household income on mortgage payments—well above the 25 % threshold that many economists consider affordable.

2. Bank of Canada Policy and Its Ripple Effects

• Current policy rate: The BoC’s overnight policy rate sits at 5.25 %—its highest level in nearly a decade. The article references the February 2024 policy meeting minutes, noting that the Bank will consider further hikes if inflation remains stubborn.
• Impact on borrowing: Higher policy rates translate into higher borrowing costs for mortgage lenders. Yet the article observes an intriguing trend: mortgage rates have begun to decline. In February, the average mortgage rate for a 5‑year fixed fell from 5.25 % (January) to 4.95 %. The BoC’s own data (link to the Bank of Canada website) shows that the policy rate has largely “decoupled” from market rates, which have been influenced more by global bond yields and lender competition.
• Inflation backdrop: CPI rose 3.6 % year‑on‑year in January 2024, the lowest level in 2021, but the BoC still keeps a hawkish stance. The article cites the BoC’s “high‑inflation” scenario, which maintains that the policy rate may need to climb to 6 % or more before inflation can be brought down to 2 %.

3. Mortgage Rates – Where Are They Heading?

The Globe and Mail piece pulls data from the Mortgage Bankers Association of Canada (MBAC) and the “Mortgage Rates” section of several major banks:

• Best‑rate offers: The lowest 5‑year fixed rate available is 4.75 % from RBC, matched by a few other lenders (TD, CIBC, BMO). These rates are tied to the “best‑rate” band, meaning the rate is a few basis points lower than the average rate offered by the lender on its mortgage products.
• Variable rates: Variable‑rate mortgages are now hovering near 4.45 %. The article notes that while variable rates have not fallen below the 4 % threshold, the gap between variable and fixed rates is narrowing, giving buyers more flexibility.
• Mortgage‑backed securities (MBS): The article cites an MBAC briefing that the “yield on MBS in Canada has stabilized at 4.8 %,” a key input for lenders’ pricing models.

Why are rates falling? The piece outlines several interconnected reasons: 1. International bond markets – The U.S. 10‑year Treasury yield has been hovering around 4 % and even dipped to 3.8 % in January, exerting downward pressure on Canadian rates. 2. Competitive lending – Canadian banks have been aggressive in cutting rates to win business in a sluggish market. 3. BoC’s “rate‑decoupling” – The policy rate no longer fully drives mortgage rates; the market has become more self‑sustaining.

4. Regional Variations and Buyer Behaviour

The article breaks the data down by region:

• Ontario: Sales declined 12 %, but price growth slowed to 3 % from 6 % in 2023. Toronto’s market remains resilient, with a high demand for condos pushing prices up 5 % year‑over‑year.
• Quebec: The province’s sales slump is the steepest, down 18 %. The article links to a Quebec Housing Board report that attributes the downturn to a combination of high rates and a shortage of affordable units.
• Prairies: Calgary and Edmonton saw a 6 % decline in sales but maintained price stability, partly due to lower interest costs for many buyers.
• Atlantic Canada: The most dramatic drop is in Nova Scotia, where sales fell 20 %. The piece references an Atlantic Canadian real‑estate association that highlights a shortage of inventory as a key issue.

Buyer sentiment: The article cites a recent survey from the Canadian Association of Realtors (link to their website) that shows 58 % of first‑time buyers are waiting for rates to fall further before making a move, while 32 % are “still in the market” but price‑hardened.

5. Policy and Regulatory Context

• CMHC mortgage‑insurance cap: The article explains that CMHC capped the mortgage‑insurance premium at 3.2 % of the loan for loans under $1 M, but this cap is set to rise to 3.4 % next year if rates rise above 5 %. This could add another 2–3 % to the effective borrowing cost.
• BC Housing Act: The article links to a provincial government page detailing the new “first‑time buyer incentive” program, which offers a 2 % rebate on closing costs for purchases under $400 k.
• Federal housing‑affordability initiatives: A link to the Finance Ministry’s “Affordable Housing Program” shows that the federal government will invest $4 billion in social housing over the next decade.

6. Expert Take‑aways

The Globe and Mail article interviews several industry voices:

• Mortgage‑banker: “Mortgage rates have slipped, but the risk‑premium hasn’t disappeared. Lenders are still wary of default in high‑rate environments.”
• Economist: “The BoC is doing its job in curbing inflation, but this means higher borrowing costs. The market will likely see a slowdown in price growth for another 12–18 months.”
• Real‑estate broker: “Even with lower rates, the affordability problem persists. Buyers are being priced out of their preferred neighborhoods.”

7. Bottom Line – What This Means for Buyers and Sellers

1. Buyers: If you’re considering a mortgage, it’s worth locking in a fixed rate now as the best‑rate band will likely stay in the mid‑4 % range for the next 12–18 months. Variable rates are close to 4 % but could climb if the BoC hiked rates.
2. Sellers: If your property sits in a high‑price area, price reductions may be necessary to attract buyers. In secondary markets, price adjustments are less steep but sales volume is declining, so patience is essential.
3. Investors: With rates falling, the spread between mortgage costs and rental yields widens, making rental properties potentially more attractive, especially in metros where rental demand remains robust.
4. Policymakers: The BoC must balance inflation control with the housing market’s fragility. The CMHC’s mortgage‑insurance adjustments and the federal affordable‑housing push are designed to keep the market stable.

In sum, Canada’s housing market sits at a crossroads. A tighter monetary policy is curbing price growth and sales volumes, yet mortgage rates are dipping into historically low territory—creating a paradoxical environment that can benefit both borrowers and investors who understand the nuanced shifts. The Globe and Mail article provides a comprehensive, data‑rich overview of these dynamics, linking to primary sources that deepen the reader’s understanding of the forces at play.