Why July's Balanced Market Has Brokers Eyeing September (2026)

The Bank of Canada held its policy rate steady at 2.25% on July 15, the eighth consecutive hold since October 2025, while inflation cooled to 2.8% year over year and home sales climbed to 43,578 units, a 2026 high. The tone from Ottawa shifted measurably more constructive: the Bank flagged GDP growth at 2.5% in Q2 and projected firmer expansion ahead, signaling that cuts may be coming, just not yet.

For mortgage brokers and lenders, July marked a turning point. After months of affordability crushing sales, demand is returning, inventories are stabilizing, and the fall is shaping up as the market's next test.

TL;DR

• BoC held at 2.25% on July 15, citing firming growth and easing inflation. Next decision: September 2.

• Home sales hit a 2026 high of 43,578 units, up 0.5% month over month on a seasonally adjusted basis, though down 5.3% year over year.

• Inflation eased to 2.8% in June, down from 3.2% in May, as gasoline price growth slowed after the Middle East ceasefire. Excluding gas, the CPI held at 2.2%.

• Housing starts fell 5% to 229,074 units in July, with Vancouver down 42% year over year. Completions are rising, keeping the pipeline full.

BoC Held at 2.25% (the Eighth Straight Hold

The Bank of Canada's July decision was a pivot in tone without a pivot in policy. The overnight rate stayed at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%, but the statement replaced caution with optimism. The Bank said "Canada's economy is showing signs of improvement," with Q2 growth estimated at 2.5%, consumer spending solid, and export growth resumed.

The forward guidance grew less hedged. The Bank projects GDP growth of 0.7% for 2026, then firming to 1.8% in both 2027 and 2028. The labour market remains slack, with unemployment at 6.4% in July, but it has stabilized and begun to drift lower.

The brake on a rate cut? External shocks. The Bank flagged the Middle East war and US trade policy as the swing risks. Higher oil prices from the conflict have dented global growth forecasts, though crude has pulled back from its April peak. The Canada-US-Mexico Agreement now faces annual reviews, adding friction, though the Bank noted businesses are "finding ways to navigate through the uncertainty."

For mortgage brokers, the signal is firm but patient. The BoC is not moving in September, barring a shock. Fixed rates, which track bond yields and not the overnight rate, remain the driver for 5-year pricing. The next decision is September 2, followed by a full Monetary Policy Report in October.

Inflation Cooled to 2.8%, Led by Gasoline

Consumer price inflation eased sharply in June, with the headline CPI falling to 2.8% year over year, down from 3.2% in May. The driver was gasoline. Fuel prices still rose 20.5% year over year, but that was well down from May's 33.2% pace after an interim Middle East ceasefire and diplomatic talks cooled global crude. Month over month, gasoline fell 10.2%.

Stripping out gas, the CPI held at 2.2% year over year, right at the Bank's 2% target. Food purchased from stores rose 3.9%, shelter 1.5%, and transportation 6.7% on the strength of travel-related services, with the World Cup kicking off.

On a month-over-month basis, the CPI fell 0.4%, the largest monthly decline since December 2024, signaling no underlying inflation pressure.

Home Sales Hit a 2026 High, Up 0.5% in July

National home sales totalled 43,578 in July, up 0.5% on a seasonally adjusted basis from June and the highest seasonally adjusted demand level so far in 2026. Year over year, sales remain soft, down 5.3%, but the month-over-month gain marked the fourth straight monthly increase.

The momentum came from Ontario. CREA senior economist Shaun Cathcart called the national read "modestly positive" and said the market is moving "modestly in the right direction," with too-hot and too-cold local markets converging toward balance. Ontario was a buyer's market six months ago but is "already halfway back to normal levels," with months of inventory only about a half standard deviation above average.

The national average sale price was $674,819, up 0.2% year over year, though prices fell on a year-over-year basis in Ontario and British Columbia while rising elsewhere. New listings fell 1.6% month over month for the third straight decline, leaving 205,388 properties listed at the end of July, just 1.5% above the long-term average.

Prices Flip-Flopped: $674,819 Average, Balanced Territory

CREA's Home Price Index edged 0.1% higher month over month but was down 3.3% year over year, reflecting the provincial split: Ontario and BC saw declines while other provinces held or gained. Royal LePage CEO Phil Soper framed the market as "healing" rather than taking off: "We're seeing the major markets and most expensive markets reflect the kind of activity we've seen in more affordable markets earlier in the year. That is balanced territory with sales volumes picking up."

The critical question is whether the fall inventory surge Cathcart flagged arrives on cue. "A lot of the inventory that's hanging around in the summer right now is stuff that didn't sell earlier," he noted. "There's usually another big burst of exciting new stuff right after Labour Day. If the buyers are there and eager, you're going to see those numbers pop up in October, November."

Housing Starts Slid 5%, Vancouver Down 42%

The total seasonally adjusted annual rate of housing starts fell 5% in July to 229,074 units, from 240,773 in June. The six-month trend measure was flat, declining just 0.5% to 247,377 units, showing the market is stabilizing at a lower level. Actual monthly starts were down 19% year over year, at 18,834 units.

Vancouver took the biggest hit, with starts down 42% year over year, while Toronto fell 10% and Montreal posted a 3% gain on higher multi-unit activity. CMHC Deputy Chief Economist Tania Bourassa-Ochoa said: "Housing starts are continuing to moderate and new home construction in Canada is evolving as per CMHC's recent Housing Market Outlook. Although the pipeline of homes under construction remains substantial and completions are increasing, fewer new projects are being started in many markets."

Completions rose 8.1% month over month to 19,773 units, and the pipeline of approved-but-unstarted units climbed 3% to 141,480, ensuring supply will keep flowing through 2027 even as new starts cool.

Mortgage Rates: 5-Year Fixed Near 5.25% on Bond Yields

With the BoC holding at 2.25% and likely to stay there through at least September, mortgage pricing is driven by bond yields and not the overnight rate. Best-posted 5-year fixed rates sat around 5.25% in mid-August, with variable-rate borrowers anchored to the policy rate and waiting for the BoC's next move.

Month-over-Month Snapshot

Our Read

The Bank's July statement reads like a pivot toward a cut the Governing Council is not yet ready to announce. Growth is firming, the unemployment rate is drifting lower, and core inflation sits near target. The only things standing between Canada and a 2% policy rate are an oil-driven gasoline spike and US trade noise, both external shocks beyond Ottawa's control. For buyers and brokers, plan around a hold through at least September. Watch bond yields, not the overnight rate, for fixed pricing. And keep September 2 on the calendar.

What We're Watching Next

• Bank of Canada's September 2 decision, with the October 28 meeting carrying a full Monetary Policy Report. Watch the forward guidance for hints at the size of the first cut when it comes.

• CREA's August national statistics release (mid-September). Does the fourth straight sales gain extend into August? Does the fall inventory burst Cathcart flagged arrive on schedule after Labour Day?

• CMHC Housing Market Outlook and August starts data. Watch whether the moderation in Vancouver and Toronto continues or if lower rates and returning demand spark a rebound.