A Market Emerging From the Deep Freeze

Canada’s housing market is slowly showing signs of life after what many in the industry have called the longest “deep freeze” in decades. According to recent data, national home sales have ticked up for three consecutive months, and July housing starts hit their highest level in nearly three years, at an annualized pace of 294,100 units.

But don’t call it a full-fledged rebound just yet. Most of the growth is concentrated in rental and multi-unit developments, while the single-family segment remains subdued. For homeowners, this signals that demand is still adjusting to higher borrowing costs, even as builders pivot toward addressing rental shortages.

Inflation Relief vs. Rate-Cut Doubts

At the same time, new inflation data brought a flicker of optimism. Canada’s annual inflation eased to 1.7% in July, down from 1.9% in June. Core inflation slipped to 2.4%—its slowest pace in nearly a year—raising hopes that the Bank of Canada might finally start cutting rates in September.

Still, policymakers aren’t entirely convinced. Minutes released last week showed sharp divisions among BoC officials: some see economic slack and weaker consumption as justification for rate relief, while others point to a still-resilient housing market as a reason to hold steady.

This tug-of-war leaves mortgage seekers and homeowners in limbo: rates could ease later this year, but there’s no guarantee.

Global Winds: The Fed Factor

Interestingly, global markets may end up doing some of the Bank of Canada’s work. When U.S. Federal Reserve Chair Jerome Powell struck a dovish tone last week, the Canadian dollar rallied 0.7%—its strongest gain in three months. A stronger loonie helps reduce imported inflationary pressures, indirectly giving the BoC more breathing room.

But currency markets are notoriously volatile, and economists warn that tying Canada’s monetary direction too closely to the Fed could backfire if U.S. conditions diverge.

What It Means for Homebuyers

For Canadians sitting on the fence about buying or refinancing, the current market offers both opportunities and challenges.

Renewal Wave:
Thousands of five-year fixed-rate mortgages taken out in 2020 are now coming up for renewal. Many borrowers are facing monthly payment increases of 20–40%, depending on their lender and term. Some are opting for shorter fixed terms in the hope of lower rates next year.
Regional Divide:
Markets such as Ontario and British Columbia remain sluggish, weighed down by high home prices and tighter affordability. In contrast, Prairie provinces and parts of Atlantic Canada are seeing healthier activity thanks to lower entry prices.
Rental Construction Surge:
For first-time buyers, the growing emphasis on rental construction could mean continued competition in the ownership market. Builders chasing rental demand may ease housing shortages overall, but it could keep ownership options limited in the near term.

Industry Voices

Mortgage brokers are advising caution. “Yes, inflation is cooling, but households shouldn’t assume a rate cut is around the corner,” one Toronto-based broker told Mortgage.Expert. “For many clients, the safer play is still a shorter fixed term, giving them flexibility if cuts materialize in 2026.”

Housing analysts echo that view. While a BCREA forecast projects brighter conditions by 2026, they stress that the road ahead in 2025 will likely be bumpy and uneven.

The Bigger Picture

Canada’s housing story today is one of mixed signals. On the one hand, the freeze of 2023–24 appears to be thawing, with sales improving and builders breaking ground again. On the other, a divided central bank and cautious consumers suggest this is more of a slow spring melt than a sudden summer boom.

For now, the message is clear: mortgage relief may eventually come, but patience is still required.

The Canadian housing market is warming up, inflation is cooling, and the Bank of Canada is under pressure to cut rates. But uncertainty remains high. For buyers and homeowners alike, flexibility and careful planning are key in this transitional phase.