Canadian Real Estate Market Update: The Rate Cuts Are Over, and Buyers Are Still Waiting

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Buying a home in Canada now takes about the same share of household income that it took in 2021. Same math. And the country is selling roughly a third fewer homes than it did back then.

That gap is the whole story of this market, and it has almost nothing to do with affordability. Gary McGowan and mortgage broker Dion Beg went through the newest national numbers on this month's RealtyChatter episode. What came out of it is a market that has already turned and has not told anybody yet.

The rate cuts are over, so stop building a plan around them

The Bank of Canada's policy rate has not moved since October 2025, and the case for it moving down is getting weaker, not stronger.

Employment is heading the right direction, with roughly 75,000 jobs added recently, although Dion is quick to point out most of those were part time. Inflation has come in just under 3%, the top of the range the Bank of Canada says it is comfortable with. Neither of those gives the Bank a reason to cut.

Markets are now pricing in two hikes over the next twelve months. Not cuts. Hikes.

Here is the part most buyers miss. The five-year Government of Canada bond sits near 3.3%, and that bond, not the Bank of Canada announcement everybody watches on the news, sets fixed mortgage rates. Today that means a five-year variable around 3.7% and a five-year fixed near 4.5% to 4.6%. Close to a full point of spread.

Dion's read is blunt. If the plan was to sit on the sidelines until rates drop, that is a bet, not a plan.

Affordability is back to 2021 levels, and that is not the point

Nationally, a mortgage payment on a typical home now eats about 20% of household income. It peaked around 30% in 2024. That is real improvement.

Two caveats. That 20% is a national average, and in the GTA it is closer to double. A bigger chunk of a Toronto household's income goes to shelter than a Saskatchewan household's, and no national chart changes that. And a swing from 30% back to 20% sounds small on a page and is enormous in a bank account.

So affordability improved. It is still challenging. It is just no longer the thing standing between buyers and the market.

What actually changed since 2021 is how people feel

Rewind to 2021. Affordability sat where it sits today, and the country transacted like the building was on fire. A property listed at a million dollars in January was worth 1.1 million by August. The mindset was simple: buy now or never buy at all.

Now run 2026. A home that was 1.4 million in 2022 is 1.1 million today. The buyer with identical affordability looks at that and thinks, why rush? Nobody knows how much further prices go, or what rates do next.

Dion has the cleanest definition of consumer sentiment anybody has offered on this show. It is whether the regular Canadian believes tomorrow will be better than yesterday. Ask that question in 2023 or 2024 and the answer was a hard no. People had watched their property values fall 20 to 30% while their rates went from 2% to 6%.

Ask it now and the answer is different, especially for the first-time buyers who stayed on the sidelines, kept saving, and watched the homes they were priced out of come down to meet them.

The data backs it up. Consumer confidence is still deeply depressed, below every reading recorded before 2020. But July delivered the strongest single month of improvement since 2023, and sentiment historically turns before sales do.

Dion's summary of where that leaves us: sentiment has changed, but it has not converted to action yet.

Nobody is building the homes families actually want

The supply story looks heavy at a glance, and that reading is half wrong. There is a pile of rental and investor condo product. The three and four bedroom detached home that most families are actually shopping for is barely being built at all. Construction of those homes is the lowest it has been since the 1990s, and completions are collapsing behind that.

Dion has a development in his own neighbourhood that tells the story better than a chart. A large parcel was assembled about seven years ago and cleared about five years ago, ready to build 13 detached homes in the 4,000 square foot range. The market turned, and the builder never pulled the trigger. That land has sat vacant since.

Then, in the last little while, surveyors showed up on it.

That is a small developer with 13 or 14 lots. The large builders are not gambling tens or hundreds of millions until they are convinced the buyers are there, so they will wait longer still. Where developers are moving, they are moving toward density, buying up one-acre lots to carve into townhomes.

Inventory has already flipped

Active listings, meaning the resale homes actually sitting on the market, are now running below where they sat a year ago. Ontario has roughly 6% fewer homes for sale than it did the same month last year. Fewer sellers, quietly.

Part of that is playing out in Dion's own client base. Some ran the renewal math, saw the payment going up, and decided they needed to sell. Then they looked at what they could buy, factored in the cost of transacting, and stayed put. An extra three or four hundred dollars a month turned out to be easier to absorb than a move. They never listed.

Watch the second week of September, which usually brings a bump in new inventory. Whether it brings more than last September is the open question for the fall.

There is no national market

Nobody lives in the Canadian real estate market. They live in a city, and usually in one community inside it.

Over the last three months, 11 of the 14 cities on the national chart posted higher prices. Toronto came in at plus 0.1%. That is a rounding error, and it is also the first time in a long stretch the number has not been negative. Top of the list to bottom is only about 3.4 percentage points, which tells you how tight the spread is.

Ontario looks like it is bottoming, prices creeping up and sales still well below normal. B.C. and Quebec are the laggards. Kelowna, a market of roughly 200,000 people, is still sitting near four and a half to five months of inventory, where three months is considered balanced.

Meanwhile in Durham region, for sale signs have been going up and sold signs have been following them. Buyers and sellers are meeting again.

The renewal wave, and what 23% actually costs

The stretch the market is in right now is the hardest part of the renewal wave, because the jump is biggest for the people renewing today. Dion still has clients who locked in at 1.79% who are renewing near 4%.

The average payment increase at renewal is running about 23%. In real money, a household paying three thousand a month is looking at close to thirty seven hundred. Six or seven hundred dollars a month, every month.

That sounds like the setup for a wave of power of sale listings, and the doom crowd has been predicting exactly that. The data says otherwise. The national mortgage delinquency rate is 0.29%. Pick almost any American city and the comparable number runs 1 to 3%. Canadians have absorbed this remarkably well.

About a third of Canadian mortgage holders are on a variable rate, and Dion's own book runs roughly half and half. Part of that is a qualifying question rather than a preference. The qualifying rate on a variable is lower, so a buyer who qualifies for 950,000 on a fixed might qualify for the million dollar property on a variable. Worth knowing: with most lenders a borrower who closes on a variable can convert to a fixed after closing at no cost, as long as they stay with the same lender.

The renewal advice is the simplest thing in this entire update. Start six months out. That is enough runway to repair credit or restructure something if it needs it. And whatever the timing, do not sign the first offer the bank sends.

What this means if you are buying

The leverage available today is better than the leverage available next spring.

Dion pre-approved a couple at 1.4 million this week for a purchase in Aurora. They were debating before Christmas or after. He asked one question: the homes you like, have they been going up or down over the last several months? Up, they said. Would waiting until spring mean lower prices? Probably not, they said. They decided to move sooner.

Spring is always the busiest season in Canadian real estate. More buyers, more competition, more bidding. Buying ahead of it means competing against fewer people.

What this means if you are selling

Competition is thinning. Fewer new listings are coming to market this fall than came last fall, and fewer completions means fewer listings arriving behind them for the next couple of years.

What drives this fall market is buyer confidence, and confidence is quietly improving. Even the tariff picture helps: the initial shock is behind us, there is talk of pauses, and Canadians are settling into the new normal.

Thinking about a move this fall?

Whether to buy, sell, or sit tight depends on your street and your numbers, not a national headline. Reach out to Gary at homes@garyamcgowan.com.

Renewal coming in the next six months? Talk to Dion's team at kangamortgage.ca before you sign anything your bank sends you.

About the Author

Paige Kirkdene is Editor in Chief at RealtyChatter.com. She breaks down the Canadian real estate market for buyers, sellers, and Realtors who want straight answers, not noise. Paige works directly with Gary McGowan, bringing his 20+ years of real estate and training expertise into every article.