Time for your cheat sheet on this week’s top stories.
Canadian Real Estate
Canadian GDP Stalls, Propped Up By Retail And Credit Cards
Canadian economic output is starting to struggle. Real GDP was flat for a second straight month in August, with only 9 out of 20 industrial sectors showing growth. Stalling appears to be an optimistic take though, as the details are a little more ominous. The pillars supporting the data were higher retail sales (mostly food) and credit card use. In other words, grocery spending and credit card debt are keeping the economy afloat. That’s more concerning given the increasing use of credit cards to make ends meet, according to TransUnion.
Canada’s Housing Agency Forecasts Surge In Mortgage Arrears, But It May Be Worse
The arrears rate at Canadian banks has made an aggressive climb and it’s not over, warns the CMHC. The CBA arrears rate has more than doubled from record lows over the past 5 years, hitting 0.29% in July—an 11-year high. The rate will climb through mid-2027, the end of the agency’s forecast period. They cite price corrections in BC and Ontario persisting as the key reason. However, prices are near record highs in other provinces and have only just begun to correct, suggesting risk is further to the upside.
Bank of Canada Sees Elevated Inflation Into 2028, Housing To Remain Weak
The Bank of Canada’s (BoC) got 99 problems and inflation’s just one—until 2028, at least that’s what they think. This week the BoC hiked its overnight rate to 2.5%, its first hike in over 3 years. Higher energy prices will trickle into broader consumer inflation, warns the BoC. As a result, headline CPI’s annual growth will remain above 3% into late 2027, returning to the 2% target by mid-2028. Just 2 more years to flatten the (inflation) curve?
Canadian Real Estate Correction Now Spreading To Other Provinces
Prices across the country surged when rates were cut in 2020. The national index has fallen 22.5% since prices peaked in 2022, when rates began to normalize. However, that correction was almost entirely the work of Ontario and—to a lesser extent—BC. The rest of the provinces remain near record highs, but that may be finally changing. Prices in some of those provinces have recently begun to make record-setting declines.
Bank of Canada Study Warns Rate Cuts Mostly Create Demand, Not Supply
BoC researchers looked at the impact of monetary stimulus on housing supply. They found that rate cuts during a housing boom boost home building by 6%, but only 20% of that is due to financing. The remaining 80% of stimulus comes from the excess demand, as profits and prices rise too. They warn ignoring shelter costs during a housing boom can lead to an aggressive climb in prices. However, there’s an area of shelter inflation the BoC should ignore—mortgage interest. Mortgage interest’s inclusion in CPI creates a self-reinforcing feedback loop. Cutting rates reduces mortgage interest, signaling the need for more rate cuts. It’s a problem we’ve noted before, warning the circular logic is avoided by most countries.
Ontario Real Estate
Ontario Mortgage Arrears To Keep Surging, Led by Toronto: CMHC
Ontario’s mortgage arrears rate at banks hit 0.32% in Q2 2026, 52% higher than last year and 5x the low in 2022. That’s only the bank rate though, which makes the picture look better than reality. High-risk borrowers get booted to mortgage investment entities (MIEs), where risk is exploding. MIEs have seen the arrears rate around Greater Toronto surge from 3% in Q3 2023 to 11.1% in Q1 2026, 3x the national MIE rate. They may only be a small share of national activity, but the bulk of their business is concentrated in one area—along with risk.
