What Happened

The Bank of Canada held its key interest rate at 2.25 per cent for the fifth consecutive meeting on Wednesday, June 10, 2025. Governor Tiff Macklem’s previous mention of potential consecutive rate hikes if oil prices climb higher had previously spiked market expectations, but softer economic data has since cooled those bets. Market expectations for rate hikes later this year have lowered from 2.5 to 1.5 hikes following the release of tamer inflation figures. Most major Canadian banks, including Bank of Montreal, CIBC, Toronto Dominion, and Royal Bank of Canada, expect the central bank to keep the rate steady throughout this year. Bank of Nova Scotia stands apart, forecasting two hikes totaling 50 basis points in the fourth quarter of 2026 and early 2027, bringing the rate to 3 per cent. Derek Holt of Scotiabank Capital Markets Economics noted his bank was the only one to predict the market move toward pricing hikes in 2026 forecasts dating back to last November. Carlos Capistran, an economist at Bank of America, described Canada as being in a technical recession with a soft labour market and net job losses year to date. Royce Mendes of Desjardins Group warned that the market is mispriced and highlighted the under-appreciated risk of a negative outcome in the Canada-United-States-Mexico-Agreement review. Mendes argued that the three countries are unlikely to agree on a 16-year extension of the trade agreement by the July 1 deadline, extending economic uncertainty. Statistics Canada’s latest jobs data showed Canadians working outside the home rose to almost 79 per cent in May, up from 77 per cent in 2025 and 75 per cent in 2022. The percentage of Canadians working exclusively from home dropped to 11 per cent in May, down 7 percentage points from May 2022. Benjamin Reitzes of BMO Capital Markets expects the Bank of Canada to take a more balanced tone in the upcoming decision. The central bank’s decision to hold rates comes amid a dilemma of economic weakness and rising inflation.

Why It Matters

The Bank of Canada’s pause reflects a complex balancing act between sluggish economic growth and persistent inflationary pressures, particularly from energy costs. Governor Tiff Macklem’s previous communication regarding consecutive rate hikes was widely considered a misstep that unnecessarily unsettled markets. The current hold signals that policymakers are waiting for clearer data on whether inflation is truly taming or if the economy is weakening further. This hesitation impacts mortgage holders and borrowers who are sensitive to rate changes, as the path forward remains unclear. The divergence among economists and banks highlights the uncertainty surrounding Canada’s economic trajectory in the face of global trade tensions.

Local Vancouver / Burnaby Context

In Burnaby and Greater Vancouver, the Bank of Canada’s rate hold has direct implications for the housing market, where mortgage costs are a primary driver of affordability. With the rate held at 2.25 per cent, borrowers face a stable but elevated cost of borrowing, which continues to influence condo prices and rental demand. The soft labour market and net job losses mentioned by economists suggest that local employment conditions may be under pressure, potentially dampening consumer confidence in the region. The shift in work patterns, with more Canadians working outside the home, may also influence housing preferences in suburban areas like Burnaby, where proximity to transit and amenities remains key. Local real estate professionals note that the uncertainty surrounding the USMCA review adds a layer of risk for investors and developers who rely on stable trade relations for construction materials and cross-border investment.

Market Impact

The rate hold provides a temporary reprieve for variable-rate mortgage holders, but the expectation of future hikes, particularly from Scotiabank, keeps long-term planning difficult. For the condo market, stable rates may prevent a sharp decline in prices but are unlikely to spur a significant surge in buying activity given the soft labour market. Investors may find the current environment challenging as borrowing costs remain high and economic uncertainty looms. The potential for a trade agreement breakdown could impact construction costs and material availability, affecting development feasibility in the region.

Investor / Buyer Takeaway

- Buyers should monitor the July 1 USMCA deadline, as a negative outcome could further weaken the economy and housing demand.

- Investors should be cautious of the potential for rate hikes in late 2026 and early 2027, which could increase financing costs for rental properties.

- Sellers may face a slower market due to the soft labour market and economic uncertainty, requiring realistic pricing strategies.

- Those with variable-rate mortgages should consider locking in rates if they anticipate further hikes, particularly if oil prices rise.

- Developers should watch for changes in construction material costs and trade policies that could impact project timelines and profitability.

Builder / Developer Perspective

Builders and developers in Burnaby and Vancouver are likely to face continued uncertainty regarding financing costs and construction material prices. The potential for rate hikes in late 2026 and early 2027 could increase borrowing costs for new projects, affecting feasibility. The soft labour market may also impact the availability of skilled workers, potentially driving up wages. The uncertainty surrounding the USMCA review adds risk to the supply chain, particularly for materials imported from the United States. Developers may need to adjust their pre-sale strategies and pricing to account for these economic headwinds.

Risk Factors

- A negative outcome in the USMCA review could significantly weaken the Canadian economy and housing market.

- Potential rate hikes in late 2026 and early 2027 could increase mortgage costs and reduce affordability.

- Soft labour market conditions may lead to further economic weakness and reduced consumer spending.

- Rising oil prices could reignite inflation, forcing the Bank of Canada to hike rates sooner than expected.

- Construction material cost volatility due to trade tensions could impact development feasibility and timelines.

BurnabyHouse Insight

The Bank of Canada’s pause is less a signal of stability and more a reflection of deep uncertainty. With the USMCA deadline looming and the economy showing signs of technical recession, the central bank is effectively waiting for the dust to settle. For BurnabyHouse readers, this means the housing market is likely to remain in a holding pattern, with prices and activity constrained by both economic weakness and the threat of future rate hikes. The divergence among banks on rate forecasts highlights that no one has a clear crystal ball, making prudent financial planning and risk management more critical than ever.