Economists say Canada’s housing market will likely continue enduring higher borrowing costs, even after the Bank of Canada decided to hold its key rate at five per cent, and some experts predict cuts could be on the horizon.


Francis Fong, a managing director at TD Economics, said he believes that after a quantitative tightening campaign from the nation’s central bank, the Canadian economy has reached an “inflection point.”

In an interview with BNN Bloomberg on Wednesday, Fong said the labour market has “bottomed out” as job growth figures have slowed. He also noted that inflation has moved closer to the Bank of Canada’s target rate of two per cent. 

Due to those factors, Fong said he believes interest rates have likely peaked – but the housing market will still have to wait for relief from high rates.

“Related to the housing market, it's likely that we won't start to see the turn in interest rates … for at least a little bit more time, another six to nine months is likely for those rate cuts to start coming in,” said Fong. 

“Which means the housing market is going to be having to deal with this current high level of interest rates for a few more months yet.” 

Randall Bartlett, the senior director of Canadian Economics at Desjardins, told BNN Bloomberg that he agrees the economy has hit an inflection point, with indicators like gross domestic product (GDP), core inflation figures and the labour market appear to trend downward.  

“We think the bank has done enough and will continue to see a slowing in the economy going forward, which will help to support a gradual return of underlying inflation to the Bank of Canada's two per cent target by the end of next year,” Bartlett said in a Thursday interview.

Due to softening economic conditions, Bartlett said interest rates could start to come down as early as the first quarter of 2024 while predicting a “short and shallow” recession at the end of this year and into early 2024. 

However, he doesn’t expect interest rates to go down to the levels during or before the COVID-19 pandemic.

“We think the Bank of Canada will keep interest rates higher for a longer period of time,” Bartlett said. 


Bartlett noted that many mortgage owners will face higher interest rates at renewal. 

“As households begin to renew their mortgages, both fixed-rate mortgage holders as well as fixed-payment variable-rate mortgage holders, they're going to come up against higher mortgage rates than what they had experienced prior to this hiking cycle,” he said.