On September 6th, the Bank of Canada decided not to hike the overnight rate, bringing a bit of relief to overburdened Canadian buyers and mortgage holders. That decision didn't really come as a surprise, however, despite the fact that economists were divided on the “will they or won't they” debate leading up to the BoC announcements.

Here’s why it wasn’t a surprise: since the last rate hike in July, unemployment has gone up half a point and Canada has seen a significant (and surprising) softening in the GDP: civil service strikes, wildfires impacting oil production, a contracting economy, and the decrease in spending power resulting from high borrowing rates and an increased cost of living have all had an impact. Plus, debt is at an all-time high, hitting $107.4B in Q2.

READ: 'We’re In A Holding Pattern:' An Expert’s Take On Ontario’s Struggling Market

So while it's certainly promising that the Bank of Canada held its rate in early September, that doesn't mean we'll be seeing a big difference in buyer confidence this fall. After those last couple of hikes, and with inflation still being higher than it should be, consumers have really put the brakes on buying. It's going to take a lot more than one rate hold to rebuild confidence. In fact, buyers are likely to head back to the sidelines until there's more certainty around interest rates.

How Has All Of This Impacted The Market?

The 2023 rate hikes didn’t affect things right away: after the jump in the market early in the year, their impact has taken months to filter through. But filter through it has. That chill you’re feeling in the air isn’t just the fall weather — the market has cooled, to the point of being frozen.

Overall, prices have dropped, properties are staying on the market longer, and it's much, much harder for buyers to qualify for mortgages. As a result, homeowners are staying put; even those who are motivated to move are discouraged by higher borrowing costs. They simply aren't putting their homes on the market.

So far, this hasn’t been a typically busy fall, and I expect things to remain quiet, with demand low and home prices relatively flat for the remainder of the year.

Should Buyers And Sellers Wait For Rates To Drop?

While I agree that the current economic landscape doesn't make this an ideal time to buy, keep in mind that it may be a while before we see rates drop in any significant way. And by a while, I don't mean months. It will be at least a year — likely more. Putting your plans on hold for that length of time may not be realistic.

If you do plan to buy or sell this year, I have two pieces of advice for you:

  1. Educate yourself and work with capable, knowledgeable people. I see a lot of buyers out there who aren't well-informed about their mortgage terms, and what level of income they'll need to maintain their debt load — and this puts them at a huge disadvantage.
  2. Be very diligent about selecting experienced professionals to help you. Work with a mortgage broker who can give you a clear picture of your financial obligations, and a REALTOR® who listens to you, communicates well, and can help you meet your goals with terms you can sustain, should interest rates go up again.

Remember, we aren't quite out of the woods when it comes to further rate hikes, as frustrating as that may be. Bank of Canada Governor Tiff Macklem has indicated further increases aren't out of the question. It remains a waiting game: educating yourself and working with the right people is the best strategy in a difficult market.


This article was produced in partnership with STOREYS Custom Studio.

Real Insights with John Lusink