Bank of Canada Rate Hold: Shaky Status Quo for Housing

Bank of Canada Rate Hold: A Shaky Status Quo for Housing

Even though today’s inventory-rich market favours buyers, heavy debt, conservative underwriting and economic uncertainty remain significant barriers.

After cutting its overnight rate in September and October, the Bank of Canada held firm on December 10, 2025, maintaining its key lending rate at 2.25%.

The Bank’s inaction today might disappoint home buyers hoping for even lower mortgage rates, but a third consecutive rate cut was never really on the table.

The Canadian economy has shown modest signs of life lately — manufacturing sales grew a healthy 3.3% in September, unemployment dipped back under 7% in October — and the Bank risks higher inflation if it cuts too aggressively.

Without additional rate cuts, a significant rebound in home sales seems unlikely. Even though today’s inventory-rich market favours buyers, conservative underwriting and broad economic uncertainty remain significant barriers.

With current mortgage rates likely to stay put until at least January 28, the BoC’s first rate decision of the new year, housing sales will be hamstrung by consumer debt and sentiment, neither of which are heading in the right direction.

Falling (further) behind

Recent data shows that Canadians are struggling to keep up with their debts. At a time when lenders are exercising extreme caution about who they lend to, missed credit payments aren’t just a red flag. For some lenders, they’re a stop sign.

In the third quarter of 2025, 1.45 million Canadians missed a credit payment, over 46,000 more than in the second quarter, according to Equifax Canada. A whopping 84% of those who missed a payment were non-homeowners.

And now we’re headed into the holidays, a time of extra spending that often swells high-interest debt.

More than half of 2024 Canadian holiday shoppers (56%) incurred holiday credit card debt last year, and more than a quarter of them (28%) are still paying off last year’s gifts, according to NerdWallet Canada’s 2025 Holiday Spending Report.

While a single missed payment won’t doom a mortgage application at many lenders, ongoing delinquency will. Equifax found that the long-term delinquency rate (90 days or more past due) in Q3 was 1.63% — 14% higher than a year before.

Long-term delinquency is rising fastest among young Canadians, who should be making up the country’s next crop of first-time home buyers. Among 26 to 35-year olds, the 90-plus-day non-mortgage delinquency rate was up 20.51% year-over-year in Q3.

Anyone in this growing cohort isn’t in a position to get a mortgage, either by their own estimation or by most lenders’. Qualifying will require finding a sympathetic alternative lender, who will likely require a 20% down payment.

Finding that kind of capital would be a stretch for most people, let alone someone unable to pay down a credit card.

This isn’t an issue a rate cut can solve. An ideal (and perhaps the only) fix would be an explosion of good jobs and wages high enough to offset the punishing cost of living.

If Canadians can’t save, they can’t pay off their debts. And if they can’t pay off their debts, who’s giving them a mortgage?

Fear of what’s coming

Sinking their life savings into a home purchase is a risk many Canadians would be willing to take, especially when mortgage rates are at or below historical norms.

But a negative view of the economy and one’s own financial situations create a potential drag on housing demand. And those views aren’t uncommon:

A September United Way-Leger survey found that 48% of Canadians felt the economy would worsen in the next six months. Forty-two percent said they could cover a month or less of expenses if they were to lose their main source of income.
The Bank of Canada’s most recent Canadian Survey of Consumer Expectations found that 67% of respondents felt the most serious effect of trade tensions on the economy is still to come.
In an October poll by The Logic/Abacus Data, 44% of Canadians said it’s a bad time to make a major purchase.

Unless economic sentiment rallies, Canadians will continue to have doubts about homeownership.

A rate hold from the Bank of Canada implies a certain level of economic stability, but it’s a decision based on granular financial data. Until consumers see tangible results in their bank accounts, any upswing in the economy will be theoretical.

Same goes for the housing market.

The bright side, dim as it is

The situation is a little rosier for Canadians in stable financial situations.

Those who can preserve their credit scores and build down payment savings despite the high cost of living are positioned to take advantage of a housing market slightly tilted in their favour.

Competition has dwindled in the country’s most expensive markets. Inventory’s up versus last year. Mortgage rates are as low as 3.45%.

But it’s fair to wonder how many of these buyers exist, and when — or if — their numbers will start rising.