Bank of Canada’s Rate Pause Could Bring Home Buyers and Sellers Back to the Market

On Wednesday, December 10, the Bank of Canada announced it would hold its key interest rate steady following an aggressive series of cuts over the previous year. Economists and market participants say this pause may encourage both buyers and sellers to return to the housing market after months of hesitation.

The central bank kept the overnight rate at 2.25%, and economists anticipate no immediate changes for some time.

Carolyn Rogers, Senior Deputy Governor of the Bank of Canada, stated during a press conference that she expects “a more balanced state in the housing market” between sales volumes and new listings.

Tom Storey of Royal LePage noted that the predictability associated with a prolonged rate pause could serve as a catalyst for activity in a market characterized by volatility and shifting expectations.

“Certainty is a wonderful thing for the housing market,” Mr. Storey said.

He observed that during the rate-cutting cycle, many buyers postponed decisions, hoping rates would fall even further. Sellers also remained cautious, waiting to see if additional cuts would lead to stronger competition.

Home sales in Canada have seen steady growth over the past couple of months, though volumes remain well below 2024 levels.

With rates now on hold, Mr. Storey believes both buyers and sellers may feel more confident in making decisions.

He expects a positive trend in sales activity but noted that more transactions do not automatically translate into higher prices.

“Sellers now understand: this is today’s price. Either I accept the price, or I leave the market,” he added.

According to him, this dynamic is particularly beneficial for buyers looking to upgrade their living situation or enter the market for the first time.

“People who are leaving the market… may have to wait a few more years to get the price they really want.”

Benjamin Tal, Deputy Chief Economist at CIBC, said that while a rate pause might attract some sidelined buyers, housing market activity will ultimately depend on whether consumers feel confident about the broader economy.

“We are in a stable environment for mortgage rates,” said Mr. Tal, who expects rates to remain steady until 2027.

However, he added that interest rates are a “secondary” factor when it comes to triggering changes in the housing market. The labour market and consumer sentiment, he noted, will play a larger role in people’s decisions to move.

A Bank of Nova Scotia survey released last week found that 62% of potential buyers said economic uncertainty is negatively affecting their finances and delaying their home purchase plans.

Local real estate agents report that similar hesitation is showing up in conversations with clients.

“A disproportionately large number of both buyers and sellers have been waiting for market conditions to improve,” said Mike Kearns, a real estate agent from Georgian Bay, Ontario.

Now that the central bank is signaling rates will likely remain stable, some may finally decide to act, “knowing that interest rates won’t necessarily become more favorable than they are now,” he added.