New research from Oxford Economics and warnings from BMO suggest that Canada’s housing market remains in a delicate position. While interest rate cuts by the Bank of Canada (BoC) are beginning to ease borrowing costs, forecasts show sluggish economic growth, gradually improving housing activity, and even the possibility of home prices declining further into 2026. Analysts warn that if the central bank cuts too aggressively, the market could overheat again — reviving speculative pressures.

Oxford Economics: Sluggish Growth Ahead

According to a recent report by Oxford Economics, Canada’s economy is expected to remain weak through 2025. Slower GDP growth, weaker consumer spending, and labour market headwinds are expected to weigh on household demand.

For the housing sector, this translates to:

Gradual improvement in activity: Some rebound in sales is expected as lower rates filter through, but demand will not surge immediately.
Price pressures remain soft: Home prices are forecast to decline modestly, with the downward trend potentially extending into 2026.
Regional differences: Some metropolitan areas may stabilize sooner, while others, particularly overheated markets, could see further corrections.

BMO: Don’t Cut Too Fast

At the same time, economists at Bank of Montreal (BMO) have issued a cautionary note. They warn that while rate cuts help ease mortgage costs, overshooting with aggressive cuts could bring back the speculative dynamics seen during the pandemic-era housing boom.

Key points from BMO’s analysis:

Affordability boost: Lower rates immediately improve buyers’ purchasing power.
Speculative risk: If buyers rush back in too quickly, demand could outpace supply again, pushing prices higher.
Policy balance: The BoC needs to walk a fine line — providing relief without re-igniting a bubble.

What It Means for Mortgage Borrowers

For Canadian homeowners and buyers, this mixed outlook has several implications:

Renewals: Borrowers coming up for renewal may find slightly lower rates, but lenders remain cautious.
First-time buyers: Softer home prices may improve entry opportunities, though qualifying stress tests remain.
Investors: With demand uncertain, property investors should be careful not to over-leverage in hopes of quick gains.

Industry Voices

Housing analysts argue that supply shortages still exist in major cities, which could limit how far prices actually fall.
Economists highlight that immigration and population growth remain supportive factors, even as affordability challenges persist.
Policy experts stress that housing outcomes will depend heavily on how the Bank of Canada calibrates its future moves.

Why It Matters

The housing market is central to Canada’s economy, and mortgage dynamics directly affect household budgets. For borrowers, the message is clear:

Stay cautious — while rates are easing, volatility remains.
Expect uneven conditions — national averages hide big differences between markets.
Plan long-term — don’t assume rapid appreciation will return soon.

Canada’s housing market isn’t headed for a rapid rebound. Instead, gradual improvements, modest price declines, and cautious central bank policy will likely define the next 18 months.