Canadian Mortgage Rates To Rise, Housing Unaffordable Until 2035: Oxford Econ

A recent report from Oxford Economics forecasts that Canadian mortgage rates are set to rise by 2026, prolonging housing unaffordability until 2035.

The Bank of Canada has been reducing its overnight rate, with expectations to lower it to 2.25% by June 2025. However, these cuts primarily affect variable-rate mortgages, offering limited relief to new borrowers. Fixed-rate mortgages, influenced by Government of Canada bond yields, have already decreased to around 5.4% and are not anticipated to drop further.

Oxford Economics predicts that fixed-term mortgage rates will remain steady through mid-2025 before increasing in 2026 due to rising bond yields and tighter monetary policy. This expected rise in rates suggests that the economy may be performing near its peak productivity, necessitating measures to control credit growth.

The report also indicates that while slower population growth may help temper rising home prices, significant improvements in housing affordability are unlikely in the near term. The combination of previous cheap credit, bailouts, and increased leverage has created a challenging environment for prospective homebuyers.

In summary, despite recent interest rate cuts, Canadian mortgage rates are expected to rise by 2026, with housing affordability not projected to return until 2035. Prospective homebuyers should prepare for continued challenges in the housing market over the coming years.