Bank of Canada rate hike adds to challenges facing Toronto housing market

Skip to Content News Archives Economy Defence Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Defence Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Defence Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomeReal EstateBank of Canada rate hike adds to challenges facing Toronto housing marketHigher borrowing costs could force prospecting purchasers to reduce their budgets or delay buyingA home for sale in Toronto. Photo by Tyler Anderson/National Post filesThe Bank of Canada’s first interest rate hike in more than three years comes as home sales and prices continue to fall in Toronto, adding another challenge for a housing market already struggling to attract buyers.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountThe central bank increased its policy rate by 25 basis points to 2.5 per cent on Wednesday, citing concerns that persistently high energy prices could fuel broader inflation. It also warned that housing activity is expected to remain relatively weak.This advertisement has not loaded yet, but your article continues below.“Canada’s housing sector is a powerful engine of economic activity, supporting employment and consumer spending across the economy,” said Phil Soper, president and chief executive of Royal LePage. “Its prolonged weakness is already weighing on economic growth, and higher borrowing costs will only deepen that challenge.”SUBSCRIBER EXCLUSIVE: FP West: Energy Insider brings you behind the oilpatch’s closed doors with exclusive insights from insiders every Wednesday morning.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of FP West: Energy Insider will soon be in your inbox.We encountered an issue signing you up. Please try againCanadian home sales fell 2.3 per cent month over month in September and 7.7 per cent from a year earlier, according to the Canadian Real Estate Association.In Toronto, sales declined nine per cent year over year, while the composite benchmark home price fell 4.7 per cent, according to the Toronto Regional Real Estate Board.Marco Pedri, a broker with Toronto-based Shoreline Realty Corp., said many prospective buyers had anticipated the increase, making an immediate shift in demand unlikely. However, those still waiting to purchase could become increasingly reluctant to enter the market.“For sellers whose properties are still sitting on the market, that could translate into a long, slow winter, with fewer buyers willing to make compromises or stretch their budgets,” he said.This advertisement has not loaded yet, but your article continues below.Pedri said sellers who need to move because of employment changes, family circumstances or financial commitments may have to lower their asking prices, while those with more flexibility could wait for better conditions.Phil Edwards, a mortgage broker with Cannect, said higher borrowing costs could force prospecting purchasers to reduce their budgets or delay buying. He has also noticed more clients seeking to lock in interest rates ahead of potential further increases.Not all realtors expect the quarter-point increase to significantly change market conditions.Sammy Kohn, a Toronto-area realtor with HouseSigma, said buyers may pause temporarily while assessing whether additional rate hikes are coming.“A 0.25 per cent increase alone is unlikely to cause a broad price decline. Local supply, employment and buyer demand will matter more,” he said.Davelle Morrison, an agent with Bosley Real Estate in Toronto, offered a different perspective, suggesting the increase could encourage some buyers to act before borrowing costs climb further.“I think it will make some buyers feel that their procrastination has caused them to miss the boat,” she said.The central bank left the door open to more rate increases but said it would proceed cautiously amid uncertainty around trade and energy prices.“It could slow the pace of recovery if more hikes follow, but I would not assume today’s move alone pushes a recovery into 2027,” Kohn said.This advertisement has not loaded yet.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.