Economic Overview
What’s Happening in the Canadian Economy – And What It Means for Your Mortgage
Canada’s economy is moving into a calmer phase after several years of high inflation and rising interest rates. The rapid interest-rate hikes we experienced were designed to slow inflation, and they’ve worked — but they’ve also made borrowing more expensive and slowed the housing market. Many households are feeling the impact through higher mortgage payments, tighter budgets, and careful spending.
Inflation has now cooled closer to the Bank of Canada’s target, which is good news for borrowers. However, everyday costs like housing, insurance, and services are still rising faster than ideal. Employment remains relatively stable, but job growth has slowed, and consumer confidence is cautious. At the same time, strong population growth through immigration continues to support long-term housing demand across Ontario and Canada.
Interest Rates
Most economists and analysts expect the BoC (Bank of Canada) to hold the overnight policy rate at 2.25%. That view is supported by the stronger-than-expected 2.6% annualized Q3 GDP growth, which has eased recession concerns and reduced the urgency for further rate cuts.
At the same time, while headline inflation has cooled toward the BoC’s target, underlying “core” inflation remains somewhat elevated — which argues against near-term rate reductions.
Accordingly, many in the market see the October cut to 2.25% as possibly the last of this easing cycle, with a pause ahead.
That said, some observers believe any further rate moves will depend on how data evolves — especially labour-market, inflation, and trade developments.
Here’s a snapshot table summarizing recent forecasts from major banks and analysts for the upcoming Bank of Canada (BoC) rate decision and the likely path for 2026—based on publicly available forecasts as of November/early December 2025.
| Institution / Analyst | Expected BoC Rate on Dec 10, 2025 | Outlook for 2026+ |
|---|---|---|
| Scotiabank | 2.25% — hold | Rate-cutting cycle over; expects rate to return to ~2.75% by late 2026. |
| TD Economics (TD Bank) | 2.25% — hold in December | Forecast stays at 2.25% through 2026–2027. |
| Consensus of economists / markets (survey, analysts) | 2.25% — hold for now | In the absence of major shocks, many expect no further cuts and a likely pause for some time. |
| A more cautious subset (e.g. some forecasting firms) | Some earlier scenarios had assumed cuts down to 2.00–2.25% by end 2025. | But with recent data, most of those have shifted — few now expect significant easing beyond current levels. |
Key takeaways from the forecasts
- The overwhelming majority now expect the BoC to hold its overnight rate at 2.25% on Dec. 10.
- According to major banks (Scotiabank, TD), the current policy rate is likely to remain stable through at least 2026, unless inflation, growth or financial conditions change significantly.
- Some banks, notably Scotiabank, even project that the next meaningful move could be a rate increase by late 2026 — signaling confidence that the easing cycle has ended. (
- The main arguments supporting a pause: recent strong GDP growth (e.g., Q3 2025 rebound), sticky core inflation, and a desire to wait for more data before acting.
Housing Market
Ontario’s housing market is showing signs of cautious recovery after the significant slowdown caused by higher interest rates over the past two years. Buyer confidence is gradually improving as the Bank of Canada moves toward a more stable rate environment and expectations grow for future rate relief. While affordability remains a challenge, especially for first-time buyers, demand is returning in well-priced segments of the market.
Home prices in many regions have stabilized, with modest increases in select urban and family-oriented communities. Luxury and recreational markets remain more sensitive to interest-rate movements but are also seeing renewed interest as buyers adjust to the new normal. Inventory levels have increased slightly, giving buyers more choice, yet overall supply remains well below what is needed to fully balance the market.
First-Time Home Buyers
This year, many first-time buyers purchased homes between $350,000 and $550,000 in rural and small-town Ontario, often using Purchase-Plus-Improvements programs for renovations.
For younger Canadians, however, homeownership remains difficult. A TD Bank survey found 53% of Gen Z feel pressure to appear financially stable despite mounting debt, while 47% cite cost of living as their main obstacle. Only 19% list homeownership as a top goal, yet disciplined savers are finding opportunities in smaller, more affordable communities.
At Buckley Mortgage, we’re all about making things simple for you. We specialize in New Home Buyers, Purchase Plus Improvement and New Home Construction Mortgages to help homeowners buy the property they can afford. Here’s how we’ve got your back:
- Understanding Your Situation: We’ll take a close look at your financial picture to find the best mortgage refinancing option for you.
- Finding Great Rates: With access to a variety of lenders, we’ll hunt down competitive rates and mortgage options that could save you money.
- Guiding You Through It: We’ll handle the nitty-gritty details and educate you along the way so you can feel confident in planning your financial future.
