Mortgage rates at 3% or lower the magic number to reignite Canada's housing market

Canada’s housing market has been stuck in neutral, and experts say the missing spark could be mortgage rates falling to about 3 per cent or lower. Right now, the average lowest rate for a five-year fixed mortgage sits near 3.74 per cent. Many potential homebuyers are holding off, suggesting that current rates are simply too high to make buying sense again.

One senior economist explains that at almost 4 per cent, borrowing costs are still very stretched and don’t motivate buyers to jump in. A recent survey found that about 68 per cent of people see today’s rates as a barrier, and nearly 40 per cent say they’ll act only if rates drop to 3 per cent or below. That’s why mortgage brokers are calling 3 per cent the “magic number” that could really light up the market again.

Despite some moves downward in rates, many Canadians still find the average monthly mortgage payment – now around $1,829 with average home prices at $678,331 – out of reach. About two-thirds of Canadians say their comfortable monthly housing budget is much lower, near $1,749, with many high-earners also saying they can’t manage today’s payments. This gap between costs and affordability is keeping market activity low.

On social media, Canadians express mixed feelings. One user put it bluntly: entry-level homes in the $600,000 to $700,000 range have never stopped having bidding wars, and the problem is that the banks still lend too much. This shows that some markets are still tense, even though many buyers are staying on the sidelines until rates come down.

Worries go beyond just buyers. Developers are cautious too. Pre-construction condo sales have dropped sharply in major cities, making it harder to secure financing and delaying new housing supply. Some housing analysts warn that this slowdown could lead to a bigger supply problem in the future unless rates fall and construction ramps up.

In short, a drop to around 3 per cent on a five-year fixed mortgage could unlock pent-up demand from buyers, ease market stress, and give homebuilders the confidence to move forward. Without that, sales and housing starts may remain sluggish, leaving Canada’s housing market stuck in a holding pattern.