This Week in Canadian Mortgages: Rate Outlook Improves as Housing Starts Slow

This week brought mixed signals for Canadian mortgage holders and prospective buyers. While experts are increasingly optimistic that interest rates could move lower in the coming months, housing construction is slowing dramatically, and Fraser Valley home prices have dipped below a key psychological threshold. Here is what you need to know.

Mortgage Rate Outlook: Why Experts Say the Next Move Could Be Lower

After a turbulent 2025 that saw bond yield whiplash push rates from the mid-3% range to above 4% almost overnight, mortgage rates have stabilized near 4% in early 2026. But stability does not necessarily mean balance, according to David Larock of Integrated Mortgage Planners.

“We have been range-bound for a while, and sometimes you are range-bound because things are stable, but that is not the case this time around because there are two forces pulling in opposite directions,” Larock told Canadian Mortgage Trends. “On the one hand, there are concerns about an economic slowdown in Canada and the U.S. that is pulling rates down. On the other hand, there are concerns around deficit levels and government spending, especially in the U.S., and that should be putting upward pressure on bond yields.”

Despite these competing forces, Larock believes the Bank of Canada will need to cut rates further this year. “I think the policy rate needs to be in a stimulative range,” he said. “We need at least one more cut by the Bank of Canada, and probably two, before its policy rate; by its own standards; is considered stimulative.”

Ben Rabidoux of Edge Realty Analytics agrees that if the Bank moves this year, it is more likely to cut than hike. “As we move through this year, there is a chance we discover that the labour market is not as strong as we were led to believe in the back half of last year,” he said. “As that happens, we should see the odds of rate cuts rise.”

Currently, the best available mortgage rates are 5-year fixed at 3.69%, 3-year fixed at 3.49%, and 5-year variable at 3.34%.

Fitch: Mortgage Repricing Will Pressure Consumer Debt

Fitch Ratings reported this week that approximately 30% of outstanding Canadian mortgages are facing upward repricing in 2026, which may pressure lower-priority consumer debt. However, the agency expects the mortgage market to remain resilient overall, with delinquencies remaining broadly stable.

For borrowers coming up for renewal, this means budgeting carefully. While the mortgage market itself is stable, higher payments could squeeze other areas of household budgets, particularly credit cards and unsecured lines of credit.

Retail Sales Rebound Could Delay Rate Cuts

Not all economic signals point toward immediate rate relief. Statistics Canada reported that retail sales fell 0.4% in December, but early estimates point to a 1.5% rebound in January. The Bloomberg Nanos Canadian Confidence Index climbed to 53.15 in mid-February, the strongest reading since late 2024.

Stronger consumer spending and rising confidence could give the Bank of Canada reason to stay patient on rate cuts. As CIBC senior economist Andrew Grantham noted, “If that is the case, it justifies the current on-hold stance from the Bank of Canada, although we will need a few more months of data to confirm if this upwards trend will hold.”

CMHC: Housing Starts Slowing Through 2028

The pace of homebuilding in Canada continues to slow with no near-term signs of a turnaround, according to CMHC data released this week. Housing starts declined 15% in January to 238,049 units on a seasonally adjusted annual basis. The six-month moving average has now declined for four consecutive months.

“We expect new construction to continue trending lower going forward as trade and geopolitical uncertainty, high construction costs, weaker demand, and rising inventories continue to constrain developer activity,” said CMHC deputy chief economist Tania Bourassa-Ochoa.

The implications are significant for housing supply. Canada needs an estimated 430,000 to 480,000 new homes annually, but construction is expected to fall to approximately 247,000 in 2026, putting supply well below what is needed to address affordability challenges.

BC Budget: Speculation Tax Rises, Abbotsford Bucks Trend

The BC government released its 2026 budget this week, revealing that housing starts in the province fell to 44,193 units in 2025, down 3.6% from 2024 and well below the government’s predicted 46,500 units.

Notably, the speculation and vacancy tax will increase from 3% to 4% in 2027. The government says this will “help ensure residential properties are used as homes rather than investments.”

One bright spot locally: Abbotsford saw a significant 79.6% increase in housing starts in 2025, bucking the provincial trend. Victoria also posted gains of 16.1%.

Fraser Valley Benchmark Falls Below $900,000

For buyers in the Fraser Valley, conditions are improving. According to MLA Canada data, benchmark pricing has declined roughly 1% since December and as much as 7% year-over-year. Fraser Valley benchmark values have fallen below $900,000 for the first time since 2021.

Sales were down over 30% month-over-month in January, while inventory levels remain well above ten-year averages. North Surrey apartment pricing has shown notable downward adjustments. For buyers who have been waiting on the sidelines, this spring may present the first meaningful opportunity in years.

What This Means For You

Here is how to interpret this week’s developments if you are a current homeowner or prospective buyer in the Fraser Valley:

For renewals: If your mortgage is coming up for renewal this year, expect higher payments if you are repricing from ultra-low pandemic-era rates. However, the worst-case rate scenarios some feared may not materialize if the Bank of Canada cuts as experts now predict.

For buyers: The Fraser Valley market is showing signs of buyer leverage returning. With benchmark prices below $900,000 and inventory above historical averages, you have more negotiating power than you have had in years. The 3-year fixed rate at 3.49% offers an attractive middle ground if you believe rates may fall further but want payment certainty.

For investors: The increased speculation tax in BC means carrying costs for vacant properties will rise. Factor this into your calculations, along with elevated vacancy rates and softer rent growth compared to recent years.

For everyone: The housing supply picture remains concerning. With starts slowing and Canada falling well short of the 430,000+ homes needed annually, any relief from current affordability challenges may be temporary once demand fully recovers.

Have questions about how these trends affect your specific situation? Contact us to discuss your mortgage strategy.