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Toronto’s already sluggish housing market could face further pressure after the Bank of Canada raised its benchmark interest rate this week, with real estate experts warning that persistent economic uncertainty is keeping prospective buyers firmly on the sidelines.
The central bank raised its key rate to 2.5 per cent Wednesday from 2.25 per cent, its first rate increase in over three years, and signalled further increases could happen. The bank cited concerns that high global oil prices and trade tensions could spread to other goods and services, driving inflation higher.
But for Toronto’s housing market, where sales and prices have already lost momentum, real estate broker Andrew Ipekian says higher borrowing costs could deepen buyer hesitation.
“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 snowball into subsequent rate hikes. If borrowing costs continue to climb, he warned, more prospective buyers will delay major financial commitments and wait out the uncertainty.
Sales and prices down in September: TRREB
Toronto’s housing market has slowed following a brief pickup in early summer, according to data from the Toronto Regional Real Estate Board (TRREB).
In September, 5,040 homes were sold across the Greater Toronto Area — a nine per cent decline compared with the same month last year.
The average selling price dropped roughly $50,000 to $1,006,409, while new listings fell 14.4 per cent year-over-year.
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As earlier optimism surrounding a potential U.S. trade deal faded, so did the predictions of a fall market boost, said Jason Mercer, TRREB’s chief information officer. Even before the rate hike, he said, households were already cautious about employment and long-term financial commitments.
“Confidence in making those [mortgage] payments over the long term has receded a little bit,” Mercer said, adding that while many households still intend to buy, they want greater clarity before taking action.
Ontario Premier Doug Ford criticized the rate hike in a post this week on social media platform X, saying it would make life more expensive for Canadians.
Raising interest rates right now is a massive mistake.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.
—fordnationMore negotiating power for buyers, broker says
During this period of overall market softness, Ipekian says sellers are most hesitant to list and buyers currently hold stronger leverage than during Toronto ’s pandemic-era housing boom. He says unconditional offers above asking price have largely given way to conditional offers, allowing time for financing, home inspections or even the sale of an existing home.
Real estate broker Andrew Ipekian says buyers have more power in the current market but many sellers are hesitant to list. (Talia Ricci/CBC)
However, Ipekian says market conditions vary significantly across Toronto’s distinct “micro-markets,” and high-demand neighborhoods in coveted school districts continue to attract steady interest. He advises against trying to time the market.
“If you buy a house today, you’re generally getting it at a discount [compared to what] it was before,” he said. “Will prices go lower? Maybe. But it’s about finding the house that you really love and want to raise a family in.”