BoC Rate Hold: No Relief Without a Trade Deal

The Bank of Canada’s Governing Council and Canadian homebuyers currently have a lot in common.

Both are waging a war with inflation. Both are watching for cracks in the labour market. Both are trying to make financial decisions in a tariff-spawned fog of uncertainty.

And both would breath easier if a beneficial trade deal with the U.S. is reached in the coming days.

For the Bank, an agreement would lower the risk faced by Canadian companies and their employees, and provide a more stable environment in which to gauge the health of the economy.

Today’s rate hold is partly a function of the BoC not knowing what the economic landscape is going to look like in 48 hours.

For homebuyers, especially those held back by tariff anxiety, the stability provided by a trade deal might be all they need to leap back into the market. Otherwise, the momentum we’re seeing in home sales could easily fizzle out.

Turning a corner

NerdWallet’s analysis of home sales in the first half of 2025 found two trends worthy of optimism. A little, anyway.

First, home sales during the first six months of the year increased in seven provinces compared to the same period in 2024. Sales were down nationally, but that’s largely due to the outsized influence Ontario and B.C. have on Canada’s total transaction count.

Where homes are affordable, demand has been strong.

“Under the surface, fundamentals are basically moving in the right direction,” says Christopher Jokel, senior data engineer for the Canadian Real Estate Association.

Second, overall home sales have risen every month since April. These increases have been painfully gradual — only 2,592 more homes sold in June than in March — but notching any gains in the current economic and emotional climate borders on the miraculous.

Three months of modest sales increases don’t add up to a rebound, especially when sales are struggling in the country’s two biggest provincial housing markets. They might, however, signal something even more important: a shift in attitude.

Sometime in the spring, homebuyers reached their saturation point with tariffs.

The previous levies hadn’t sledgehammered the economy; those announced by U.S. President Donald Trump in April were generally scaled back or scuttled. Against that backdrop, moving forward with a home purchase seems less risky.

But then the wind shifted and the trade war entered a stormy new phase.

Running into a wall

In a July 10 letter to Prime Minister Mark Carney, Trump declared that the U.S. will impose 35% tariffs on Canadian goods starting August 1.

Negotiations on a tariff-averting trade deal between the two countries continue, but not smoothly.

On July 25, Trump expressed doubt that a satisfactory pact would be reached. On July 28, Carney called the situation “tense” and “complex.”

Another wave of tariffs, codified in a trade agreement, will hit different. These levies will be here to stay, and their impact will compound over time.

Homebuyers currently enjoying a moment in the sun could once again see their financial plans darkened by a cloud of uncertainty. The positive shift we’ve seen in buyer mentality over the last few months could easily reverse course.

We’ll know more in a couple of weeks, when CREA releases its July sales report. Another month of gains feels achievable, but then what?

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All eyes on Ottawa

Ask around the real estate industry and you’ll hear a familiar refrain: the near-term future of Canada’s housing market depends on a trade deal that protects Canadian employees and puts their worries to rest.

“If uncertainty is the cause of the housing market swoon then ending that uncertainty is paramount to the recovery,” Brendon Ogmundson, chief economist at the British Columbia Real Estate Association, said by email.

Some, like new Re/Max Canada president, Don Kottick, are optimistic that a beneficial agreement can be reached.

“A number of countries internationally have managed to negotiate their way out, and I would hope that the current Canadian government has the ability to negotiate their way out of this,” Kottick says.

But even if a trade deal materializes, Jokel wonders whether Trump can be trusted to honour it.

“If tariffs can go from 25 to 35 [percent], seemingly overnight and for no reason, I don’t know what the justification for that 10 percent is. Why couldn’t they go from 35 to 50 [percent], or any other number at any given time?” he says.

If an agreement is reached, it’s unclear whether home buyers would devote much mental energy to Trump’s unpredictability. It wouldn’t be healthy or beneficial for them to stew about something beyond their — and seemingly anyone else’s — control.

What’s more likely is that buyers see just enough stability in a trade deal to move forward with the purchases they’ve been delaying.

The demand is there. They just need a reason to stop looking over their shoulders and start moving forward.