Jose Delgado

The Bank of Canada today increased its target for the overnight rate by 25 basis points to 2.5%, with the Bank Rate at 2.75% and the deposit rate at 2.45%.

Since the July Monetary Policy Report, global economic activity has remained resilient, despite higher energy prices. In the United States, the economy continues to grow at a robust pace, supported by consumer spending and AI-related investment. Growth in the euro area has been resilient and broad-based. After slowing in the second quarter, Chinese growth rebounded in the third quarter, owing to strength in exports and a pickup in fiscal spending. With persistently elevated oil prices and refinery margins, inflation has risen in most countries. 

Given the ongoing resilience of the global economy, the Bank has revised up global GDP growth slightly to 3.1% in 2026, while growth in 2027 and 2028 remains unchanged from the July projection at 3.2%.

Global financial conditions have tightened since July. Advanced economy sovereign bond yields are higher. Equity and credit markets have been volatile due to uncertainty about the outlook for the AI sector. The Canadian dollar had weakened somewhat on US-dollar strength but has since recovered to around 71 cents – the same as assumed in the July Report.

In 2024, 23.2% of Canadian households lived in housing unaffordable to them—defined as spending 30% or more of their income on shelter costs—up from 22.0% in 2022. Renters (33.7%) were more likely than owners (17.4%) to live in unaffordable housing. This gap has been stable since 2018, the first cycle of this survey.

In 2024, over one-third (36.6%) of households in Canada were homeowners with a mortgage, 27.8% were homeowners without a mortgage, and 31.3% were renters in the private market. More than one-quarter (26.1%) of homeowners with mortgages lived in unaffordable housing, up from 23.6% in 2022. This drove the overall increase in the share of households in unaffordable housing, as renters living in market rental units saw no change in their unaffordability rate over the same period.

These results are from the 2024 Canadian Housing Survey, which collects information about housing needs and experiences from a sample of Canadian households across the 10 provinces. The survey is undertaken as a collaboration between Statistics Canada and the Canada Mortgage and Housing Corporation.

Increasing the use of Canadian wood products may facilitate up to a 17% decrease in ground-oriented housing costs and about 3.5% more housing starts annually.

Key Highlights

• Since 2025, residential construction costs have increasingly been driven by tariff-affected products such as steel, aluminum and manufactured building components. Before that, wood, plastics and composites products largely drove cost price inflation.
• U.S. tariffs on Canadian lumber and transformed wood products may leave more wood available in Canada, creating an opportunity to better use our domestic resources to lower the cost of building homes.
• Ground-oriented housing (detached houses and townhouses) stands to benefit the most. These homes use far more wood products than high-rise apartments and have become increasingly difficult to build in many markets.
• Realizing this opportunity will require better east-west transportation links and continued efforts to reduce internal trade barriers.

What if the latest U.S. tariffs ended up lowering housing construction costs in Canada? While this may sound counterintuitive, new CMHC analysis suggests that tariffs on Canadian lumber and transformed wood products could create an opportunity to build some homes more affordably.

If more Canadian wood products stayed in Canada and were used more consistently across the country, construction costs for ground-oriented housing could fall by as much as 17% in some centres. This would include costs for detached houses and townhouses. Such a change in building habits may lead to an increase of 3.5% in annual ground-oriented housing starts across the country, or close to 4,000 more starts annually. In centres like Calgary, the increase would be close to 8%, while in Toronto and Ottawa it would be about 4.5%.