TD Bank Lowers Forecast for Canadian Housing Market Amid Rising Borrowing Costs

TD Bank has revised its outlook for the Canadian housing market, citing persistent challenges from elevated borrowing costs. The bank now projects that home sales will drop by 5% throughout 2026, with property prices expected to remain largely flat. This adjustment reflects a broader trend of caution among potential buyers who are navigating a complex financial environment. The updated forecast highlights the ongoing struggle to balance market activity with the realities of current interest rate policies. Analysts suggest that the combination of high costs and economic uncertainty is keeping many participants on the sidelines. While some regions have seen localized spikes in activity, the national picture remains one of cooling demand. The shift in expectations comes as the industry continues to monitor the impact of recent regulatory changes on mortgage accessibility. Earlier in 2024, the Office of the Superintendent of Financial Institutions introduced measures to ease stress tests for certain mortgage renewals, aiming to provide some relief to existing homeowners. Additionally, new rules allowed first-time buyers to access 30-year amortization terms for properties up to $2 million. Despite these policy interventions, the market has not experienced the immediate surge in activity that some had anticipated. Sellers are currently facing a more competitive landscape, characterized by a gradual rise in listings that is not yet matched by a corresponding increase in buyer demand. The federal government has also launched the Build Canada Homes initiative to address long-term supply issues. This program is part of a broader effort to improve housing affordability after decades of limited intervention. Experts are now calling for an outcomes-based framework to better measure the success of these federal policies. As the country enters what some describe as a market reset phase, the focus remains on how immigration targets and interest rate adjustments will shape the future of home ownership. The path forward will likely depend on the ability of policymakers to remove regulatory barriers while maintaining financial stability.