Jason Burt

Mortgages remain a hot topic in corporate boardrooms, around policy tables and even during family dinners. Canada is standing right in the middle of the major mortgage renewal waveone that experts have long warned about. In the midst of this mortgage renewal wave, are Canadian homeowners able to keep up with their mortgage payments at higher rates during a time of economic uncertainty and rising unemployment? The national mortgage arrears ratethe share of mortgage consumers who have missed payments for 90 days or morehas been increasing. However, this trend is nuanced, and its interpretation has led to some confusion. The fact is that Canadian homeowners are facing 2 distinct financial realities. On one side, are emerging risks, while on the other, mortgage arrears remain low. On one hand, there are clear signs of household financial strain in regions like Toronto and Vancouver, where arrears are projected to continue increasing steadily. Additionally, certain groups of borrowers across the country are showing greater vulnerability than others. For these groupsespecially the pandemic-era first-time homebuyersthe financial pressure is much more evident. On the other hand, Canadian homeowners have proven to be remarkably resilient given the challenges theyve had to navigate. While the increase in mortgage arrears has been significant (+7 bps between 2023 Q3 and 2025 Q3), arrears remain historically low. https://www.cmhc-schl.gc.ca/observer/2026/mortgage-renewal-wave-strains-some-regions-borrowers

US tariffs and the unpredictability of future trade arrangements are disrupting the Canadian economy. Growth in Canada is expected to remain modest, while inflation stays close to 2%. The Canadian economic outlook is little changed since the October Report. Canada continues to adjust to a new trade landscape. Affected businesses are reconfiguring their trade and seeking new suppliers and markets. As this adjustment proceeds, capital will start being reallocated and some workers will shift into new roles. This adjustment will take time, and growth will be restrained through the transition. Uncertainty remains high. The world is becoming more fragmented, and geopolitical risks are elevated. For Canada, the future of trade in North America is an important uncertainty. https://www.bankofcanada.ca/publications/mpr/mpr-2026-01-28/overview/

Summary Home transactions totalled 470.3K in 2025, a 1.9% decline compared to 2024 but a stronger year than 2023. On a monthly basis, transactions were down 2.7% from November to December, a third decline in four months that is difficult to explain given recent interest rate cuts and improvements in the labour market. New listings declined by 2.0% from November to December, a fourth consecutive decline. Active listings edged down 0.5% from November to December, the fifth decline in six months. Market conditions loosened slightly during the month but continued to indicate a balanced market compared to the historical average. Still, the balanced market conditions at the national level largely reflect soft conditions in Ontario and B.C., while markets in all other provinces continue to favour sellers. Housing starts ended 2025 on a strong note, rising for the second consecutive month to reach 282.4K, their highest level in five months and well above consensus expectations. In 2025, there was a total of 259.0K housing starts nationwide, an increase of 5.6% compared to 2024. This makes it the third-strongest year on record for the new construction market after 2021 and 2022. The TeranetNational Bank Composite National House Price Index remained stable from November to December after seasonal adjustment. Six of the eleven CMAs included in the index recorded increases: Ottawa-Gatineau (+2.9%), Edmonton (+1.2%), Winnipeg (+1.1%), Calgary (+0.7%), Vancouver (+0.2%) and Quebec City (+0.1%). Conversely, prices declined in Hamilton (-1.8%), Halifax (- 1.0%), Victoria (-0.8%), Toronto (-0.5%) and Montreal (-0.2%). From December 2024 to December 2025, the composite index declined by 3.5%. https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-resale-market.pdf

On Wednesday, January 28, 2026, the Bank of Canada held its target for the overnight lending rate steady at 2.25% for the second consecutive time, a move widely expected by analysts. As forecast by the Bank, Canadas Gross Domestic Product (GDP) marked robust growth in the third quarter of 2025 but is expected to be flat in final quarter of the year, when that data is released. Exports to the United States are acting as a drag on economic growth due to ongoing tariffs. Meanwhile, the Bank noted that although employment numbers have picked up in recent months, the unemployment rate remains elevated, particularly for younger people. Its survey of businesses also reveals few of them intend to increase their workforces. The Bank projects economic growth of only 1.1% in 2026, as slower population growth and adjustments to U.S. protectionism act as headwinds on Canadas economy. It also referenced the upcoming review of the Canada-US-Mexico (CUSMA) agreement as one of the major sources of uncertainty its watching this year. The Consumer Price Index (CPI) inflation has been slowing recently and is trending closer to the Banks 2% target. Although CPI inflation is expected to stay near that level over the projected horizon, the Bank noted in its January Monetary Policy Report (MPR) inflation for items such as food services and rent remain well above their long-term averages. https://www.crea.ca/media-hub/news/bank-of-canada-maintains-policy-rate-at-2-25-2/

The Bank of Canada today held its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%. The outlook for the global and Canadian economies is little changed relative to the projection in the October Monetary Policy Report (MPR). However, the outlook is vulnerable to unpredictable US trade policies and geopolitical risks. Economic growth in the United States continues to outpace expectations and is projected to remain solid, driven by AI-related investment and consumer spending. Tariffs are pushing up US inflation, although their effect is expected to fade gradually later this year. In the euro area, growth has been supported by activity in service sectors and will get additional support from fiscal policy. Chinas GDP growth is expected to slow gradually, as weakening domestic demand offsets strength in exports. Overall, the Bank expects global growth to average about 3% over the projection horizon. Global financial conditions have remained accommodative overall. Recent weakness in the US dollar has pushed the Canadian dollar above 72 cents, roughly where it had been since the October MPR. Oil prices have been fluctuating in response to geopolitical events and, going forward, are assumed to be slightly below the levels in the October report. https://www.bankofcanada.ca/2026/01/fad-press-release-2026-01-28/

The Canadian Real Estate Association (CREA) has updated its 2026 forecast for home sales activity and average home prices via the Multiple Listing Service (MLS) Systems of Canadian real estate boards and associations and extended the outlook to include 2027. One year ago, expectations were that 2025 would mark a turning point, with buyers beginning to come off the sidelines after a significant slowdown across many Canadian housing markets. That slowdown coincided with the Bank of Canadas use of higher interest rates to fightand ultimately winits first battle with inflation since adopting its inflation-targeting mandate in 1992. While the economic uncertainty resulting from U.S. tariff threats ultimately resulted in another slow year for housing in 2025, most of that weakness was front loaded in the first months of the year. Beginning in April, the market underwent a rally that saw sales climb 12% by August. While this slowed into more of a holding pattern to finish the year, its that mid-year upward trend that is expected to pick up once again in 2026. A major factor underpinning this forecast for higher activity in 2026 is pent-up demand, particularly from first-time buyers, many of whom have been shut out of the market over the past four years. While interest rates have not fallen as far as many may have hoped for, they have likely fallen far enough to restore the attainability of homeownership for many, despite affordability that remains more challenging than it was prior to 2020. https://www.crea.ca/media-hub/news/crea-downgrades-resale-housing-market-forecast-amid-tariff-uncertainty-and-economic-uncertainty/

CANADA HOUSING MARKET: FOR 2025, THE EARLY-YEAR OPTIMISM WAS SIDETRACKED BY RISING GLOBAL TRADE FRICTIONS AND UNCERTAINTY National housing sales (in units) posted another monthly decline in December. The sales-to-new listings ratioan indicator of market conditions tightnesseased modestly over this period with new listings also declining, but at a lesser pace than sales. The national MLS HPI continued its downward trend in December, consistent with easier housing market conditions nationally. National (unit) sales fell -2.7% (sa figures) from November to December, after a -0.8% monthly decline in November. In December, they were -10.1% below their most recent peak achieved in November 2024, and 4.5% (nsa figures) below their December 2024 level. National new listings posted their fourth consecutive monthly decline in December with a -2% (sa) print. However, they were in December 0.8% higher than the same month in the previous year. National resale market conditions eased in December, from both the previous month and from the same month in 2024. The monthly easing reflects a 0.4 percentage point decline (sa) for the sales-to-new listings ratio from November to Decemberas the decline in sales modestly outpaced that in new listingsas well as a modest rise in months of inventory from 4.4 to 4.5 months over this period. Second, the yearly progression in both the sales-to-new listings ratiodeclining by 3.5 p.p.and months of inventoryrising by 0.6 monthsuggests easier resale conditions last December compared to a year earlier. https://www.scotiabank.com/ca/en/about/economics/economics-publications/post.other-publications.housing.housing-news-flash.january-15--2026.html

The number of home sales recorded over Canadian MLS Systems declined 2.7% on a month -over-month basis in December 2025. On an annual basis, transactions totalled 470,314 units in 2025, a decrease of 1.9% from 2024. The year was characterized by a tariff -induced flight of buyers back to the sidelines in the first quarter, followed by a decent sales rally mid -year, and a bit of a stall to finish off 2025. There doesnt appear to have been much rhyme or reason to the month - over-month decline in home sales in December, which was simply the result of coincident but seemingly unrelated slowdowns in Vancouver, Calgary, Edmonton, and Montreal, said Shaun Cathcart, CREAs Senior Economist. For that reason, it would be prudent for market observers to resist the temptation to trace a line from the end of 2025 into 2026. Rather, we continue to expect sales to move higher again as we get closer to the spring, rejoining the upward trend that was observed throughout the spring, summer, and early fall of last year. December Highlights: National home sales declined 2.7% month -over-month. Actual (not seasonally adjusted) monthly activity came in 4.5% below December 2024. The number of newly listed properties dropped 2% on a month -over-month basis . The MLS Home Price Index (HPI) dipped 0.3% month-over-month and was down 4% on a year-over-year basis. The actual (not seasonally adjusted) national average sale price was virtually unchanged ( -0.1%) on a year-over-year basis. https://www.crea.ca/media-hub/news/home-sales-in-canada-end-2025-quietly/

From TD Economics Relative to our September projection, weve upgraded our 2025 growth forecasts across most regions, partly on the back of data revisions that showed economies entering the year with stronger momentum than expected. We continue to see PEI, AB, SK and NF as growth leaders this year, lifted by goods-producing industries. Meanwhile, QC, MB and ON are the likely laggards, weighed down by the trade war. For 2026, we see commodity-producing provinces outperforming again, but their margin of outperformance is likely to shrink amid moderately lower commodity prices, most prominently crude oil. Meanwhile, with the trade war proving less damaging than initially feared, provinces more geared to U.S. trade like ON, MB, QC, and NB have seen upgrades to their 2026 growth forecasts. Provincial exports have improved mildly since the peak of the trade shock in Q2-25, but limited trade-data access has clouded recent recovery trends. We assume that current tariff rates as well as the USMCA exemptions remain in place over the forecast horizon. The outcome of USMCA renegotiations is a risk to the outlook. Job markets in most provinces have turned in a more resilient performance than we had expected in September. Downside surprises in unemployment rates have been most pronounced in ON, AB, QC, NB, and PEI. While we could see job markets stumble again over the next few months, were expecting unemployment rates to broadly peak by Q1-2026 before drifting lower thereafter. Significant regional variations will exist as Canadas housing market continues its gradual improvement next year. Price growth is likely to lag significantly in Ontario and, to a lesser extent, B.C., reflecting loose supply/demand conditions. In contrast, Quebec and the Prairies are likely to see firmer price gains, underpinned by tight conditions, and decent affordability (in the Prairies). Population growth is projected to continue to decelerate sharply across provinces in response to recent changes in federal immigration policy. These changes are constraining labour force growth, limiting upside in provincial jobless rates and pressuring down rents and to a lesser extent consumer spending. Provinces most exposed to these effects include ON, B.C. and QC due to their higher non-permanent resident (NPR) shares. https://economics.td.com/provincial-economic-forecast

From CMHC Structural barriers continue to slow progress Policies on funding, zoning reform and the Housing Accelerator Fund have contributed to progress on housing. However, delivery remains slow due to structural barriers like long permitting times and inconsistent zoning, even as policy momentum builds. Innovation and scaling in private and non-profit sectors are crucial to boosting productivity. Canada must double housing starts annually by 2035 to close the supply gap. While momentum is growing, bold action and stronger coordination are needed to turn plans into results. Canadas housing delivery system Even with incentives, Canadas build pipeline is slow to respond. There are signs of progress in some markets like Montral and Ottawa, but system-wide barriers remain. To accelerate delivery and close the supply gap, we need faster approvals, modernized permitting, better municipal data and scalable innovation in construction. Scale remains a key challenge across much of the construction sector. Shifts in housing starts and rental markets Housing starts were strong early in 2025 but slowed down later in the year. Toronto and Vancouver were hit hardest, with year-over-year numbers going down. Among key reasons for the slow-down were high interest rates, labour and material shortages, developer uncertainty and the cancellation of marginal projects. Meanwhile, starts remained strong in Alberta. 2025 saw the first meaningful easing in rental conditions but affordability remains tight. Rental market indicators are moving in the right direction overall, with vacancy rates going up and rent growth slowing, showing that the market is balancing out. However, we need to consider sustaining the market and rental supply in the long term. https://www.cmhc-schl.gc.ca/observer/2026/2025-year-in-review