When the Bank of Canada holds its key rate, homebuyers and owners pay close attention. In this highly anticipated decision, the Bank of Canada (BoC) kept its benchmark interest rate at 5.0 per cent. It was the fourth hold in a row. It also signalled a possible shift in the bank’s tightening cycle. Economists widely expected the move, yet it still carried significant implications for the Canadian housing market.
This post was first written in January 2024. The figures below are from that rate decision.
Why the Bank of Canada Holds at 5.0 Per Cent
The central bank had raised borrowing costs since March 2022 to fight inflation. By this point, the higher rates were in place and working through the economy. So the bank chose to hold and let those earlier increases do their job.
Governor Tiff Macklem said the higher rates need time to deal with inflation pressures. In other words, the bank wanted to wait and watch before making its next move.
Signs the Tightening Cycle Has Peaked
The decision hinted that the tightening cycle may have peaked. Macklem’s prepared remarks showed a clear change in focus. Earlier, the discussion was about whether rates were high enough. Now, the question was how long the Bank of Canada holds rates at the current level.
That is a meaningful change in tone. However, it is not a promise of cuts. Instead, it tells borrowers that the bank’s next step depends on the data.
Rate Cut Talk as the Bank of Canada Holds
Market watchers had already started to forecast a timeline for rate cuts. Many expected easing between spring and summer of 2024. Still, Macklem stressed that rates could rise further if inflation did not cooperate.
For borrowers, that means planning for more than one outcome. A budget that works at today’s rate gives you room to breathe if cuts come later. If you want to know when these decisions happen, read how often the central bank announces its rate.
Inflation Concerns and Slow Growth
Annual inflation rose to 3.4 per cent in December, up from 3.1 per cent the month before. Macklem pointed to inflation pressures that were proving hard to shake.
The Monetary Policy Report (MPR) repeated the bank’s view that inflation would reach its two per cent target by 2025. However, Macklem cautioned that future declines in inflation would be gradual and uneven. So the path back to target looked slow. The report also pointed to sluggish economic growth. In short, the Bank of Canada holds for now, but it stays ready to act.
What It Means for the Canadian Housing Market
The decision to hold, and the signals of a policy shift, matter for housing. The central bank must balance its fight against inflation with support for growth. Meanwhile, everyone in the housing sector watches closely for changes in borrowing costs, mortgage rates and market activity.
Each time the Bank of Canada holds, the effect on housing is quieter than a cut or a hike. Prices do not jump overnight. Instead, the hold shapes how confident people feel. Some buyers move ahead because payments are stable. Others wait, hoping lower rates are close. That mix of moods can keep a market steady for a while.
Here is how a hold tends to affect people in Mississauga and the GTA:
- Buyers: a hold keeps variable rates steady, which makes budgets easier to plan.
- Owners with a renewal ahead: it is a good time to compare lenders and terms.
- Sellers: some buyers wait for cuts, so pricing a home right matters even more.
How GTA Homebuyers Can Prepare When the Bank of Canada Holds
A pause is a good time to get your finances in order. First, get a pre-approval so you know your real budget. Next, test your budget at a higher rate to see if you are still comfortable. Finally, talk to a mortgage professional about fixed and variable options.
It also helps to think about timing in plain terms. If you find the right home, a pause is not a reason to wait. After all, nobody can know for sure when the next cut will come. On the other hand, if your budget only works after a cut, it is wiser to wait and keep saving. Either way, a clear plan beats guessing what the central bank will do at its next meeting.
Sellers can prepare too. Look at recent sales in your neighbourhood, not last year’s peak prices. Then fix small problems before you list, since buyers notice them. Also, be ready to talk with buyers who need a little more time for financing. Whether the Bank of Canada holds, cuts or raises its rate next, these steps still make sense for your move.
Rates have moved a great deal since this decision. For what happened next, read my post on the first rate cut to 4.75 per cent. You can also look back at the October 2023 rate hold.
Talk to a Mississauga real estate agent
Do you have questions about interest rates and your home plans? I am happy to help. Call A. Q. Mufti, Sales Representative, RE/MAX Real Estate Centre Inc., Brokerage, at 416 908 5600, or send me a message. And if this post helped you, a Google Review is always appreciated.
Disclaimer: this article was published on 17 January 2025 and reflects the information available at that time. Interest rates, prices, and government programs change, so check the current position before acting on anything here. It is provided for information only and is not financial, mortgage, tax or legal advice. A. Q. Mufti is a registered Sales Representative with RE/MAX Real Estate Centre Inc., Brokerage, Ontario, Canada.
