Bank of Canada rate hike deepens uncertainty for Toronto housing market
Real estate experts warn higher borrowing costs are keeping buyers on the sidelines as sales and prices decline.
TORONTO · The Bank of Canada's interest rate increase this week is adding pressure to Toronto's already slowing housing market, with experts warning higher borrowing costs are deepening buyer hesitation. The central bank raised its key rate to 2.5 percent from 2.25 percent on Wednesday, its first increase in over three years, and signalled further hikes could come. Real estate broker Andrew Ipekian said consumer confidence is already low and the rate move could crush it further. The Toronto Regional Real Estate Board reported that September sales in the Greater Toronto Area fell nine percent year-over-year to 5,040 homes, while the average selling price dropped roughly $50,000 to $1,006,409.
"Consumer confidence is generally at an all-time low and you're going to crush that," said Ipekian. He said buyers are increasingly anxious about whether this increase will lead to subsequent rate hikes, warning that if borrowing costs continue to climb, more prospective buyers will delay major financial commitments. Jason Mercer, TRREB's chief information officer, said even before the rate hike, households were cautious about employment and long-term financial commitments as earlier optimism around a potential U.S. trade deal faded. "Confidence in making those [mortgage] payments over the long term has receded a little bit," Mercer said, adding many households still intend to buy but want greater clarity first.
New listings in September fell 14.4 percent year-over-year. During this period of market softness, Ipekian said sellers are most hesitant to list and buyers currently hold stronger leverage than during Toronto's pandemic-era housing boom. Unconditional offers above asking price have largely given way to conditional offers, allowing time for financing, home inspections or the sale of an existing home. However, Ipekian said market conditions vary significantly across Toronto's distinct micro-markets, and high-demand neighborhoods in coveted school districts continue to attract steady interest.
Ontario Premier Doug Ford criticized the rate hike in a social media post this week, saying it would make life more expensive for Canadians. "Raising interest rates right now is a massive mistake," Ford wrote. "Higher rates won't get oil moving through the Strait of Hormuz or lower tariffs on Canadian businesses. They will only make life more expensive for Canadian families and workers, punishing them for something they can't control." The Bank of Canada cited concerns that high global oil prices and trade tensions could spread to other goods and services, driving inflation higher.
With files from CBC News