TD Economics’ recent quarterly review signals a more tempered outlook on Bank of Canada (BoC) monetary easing. Although economic growth is softening, the central bank may hesitate to make steep rate cuts—largely due to the unexpectedly resilient housing market.

A Balanced Backdrop

Cautious Tone from TD Economics: The report—with input from Mortgage Professionals Canada—indicates that while Canada’s economic growth is slowing, policy decisions should remain restrained given how buoyant housing activity has remained. TD notes the current policy rate is already in the neutral zone, suggesting limited scope for aggressive easing.
Rate Cuts Not Guaranteed: Instead of a single cut in 2025, TD suggests the BoC may opt for either zero or two cuts, avoiding a “one-and-done” scenario.

Housing: The Unexpected Stabilizer

Sales Rebound: Home sales have increased for four consecutive months, signaling resumed buyer demand.
Price Recovery: On average, housing prices are up approximately 5% over the same period, highlighting renewed confidence in the market.
Delayed, But Strong: TD points to delays caused by U.S. tariffs early in the year, noting those impacts appear to have faded, giving way to a more solid housing rebound.
Forecast Insight: While a full-scale recovery may not arrive until next year, TD projects that sales could grow around 9%, and prices climb roughly 5%, as early indicators align into a growth trajectory.

Policy Implications for Mortgage Markets

Weaker Case for Immediate Cuts: The combined strength of the housing sector and lagging economic softness reduces urgency for rate cuts—contradicting earlier forecasts of immediate easing.
Potential for Tailored Monetary Moves: TD proposes that policymakers might apply a mix of no cuts or a couple of cautious reductions in 2025 rather than holding an aggressive easing stance.
Borrower Outlook: Mortgage seekers may see modest relief later in the year—but not the dramatic rate reductions once anticipated. Variable-rate holders might benefit sooner, but fixed-rate borrowers expect more conservative adjustments.

Why It Matters for Mortgage.Expert Readers

Rate Strategy Adjustments: Understanding the nuanced BoC outlook helps homeowners and buyers make more informed decisions—whether to lock in fixed rates or ride out variable options.
Regional Sensitivity: Hot markets like Toronto and Vancouver—where sales and prices are rising—may delay borrowing relief, while others may benefit more from incoming cuts.
Future Forecasting: Reliable timing of rate changes impacts mortgage renewal strategies, refinancing plans, and long-term homeownership costs.

Conclusion

Canada’s housing market strength is reshaping monetary expectations. Rather than swift rate relief, economists foresee a more cautious strategy: possible modest cuts later in 2025, driven by strong housing data and tempered economic uncertainty. For homeowners and mortgage professionals, understanding this context is essential for planning and positioning in a nuanced rate environment.