The Rate Cycle So Far
The Bank of Canada began cutting its overnight rate in mid-2024 after holding at elevated levels for over a year. Through the second half of 2024 and into 2025, a series of measured cuts brought the rate down incrementally. By early 2026, the cumulative effect is significant: mortgage rates have dropped approximately 1.5–2 percentage points from their 2023 peaks.
For a typical GTA home purchase, this translates to real savings. On a $600,000 mortgage at a 5-year fixed rate, the difference between a 6% rate and a 4.75% rate is approximately $450/month — or $5,400 per year. For buyers, this improved affordability is the primary driver of renewed market activity.
Impact on Buyer Behaviour
TRREB's January and February 2026 data shows a clear uptick in sales volume compared to the same months in 2025. Buyer activity is strongest in the $600,000–$1,000,000 range — the core of the GTA market — where the rate reductions have the most impact on monthly payment affordability.
Pre-approvals are up significantly, indicating that more buyers are preparing to enter the market. Mortgage brokers report increased inquiry volume, particularly from first-time buyers who had been waiting on the sidelines.
Impact on Prices
Price recovery has been selective. Detached homes in established 416 neighbourhoods have seen 3–5% year-over-year appreciation as of February 2026. The 905 freehold market has been slower to respond, with 1–3% growth. Downtown condos remain flat to slightly negative — elevated supply from investor resales is offsetting the demand boost from lower rates.
The market is not returning to 2021-style price surges. Buyers are more cautious, the stress test still limits borrowing power, and inventory levels are healthier. This is a normalizing market, not a boom.
Variable vs. Fixed Rate Dynamics
With the Bank of Canada expected to continue modest rate adjustments, variable-rate mortgages have become more attractive. The current variable rate discount is meaningful compared to fixed rates, and borrowers who believe rates will continue to ease are choosing variable. However, fixed rates remain popular among risk-averse buyers who prefer payment certainty.
The spread between variable and fixed rates is narrower than it was in 2023, making the decision less dramatic. Consult your mortgage broker for a personalized analysis based on your risk tolerance and financial situation.
What to Watch in Q2 2026
The Bank of Canada's spring decisions will set the tone for the traditionally busy April–June selling season. If rates continue to edge lower, expect increased buyer activity and modest upward pressure on prices — particularly in the freehold segment. If rates hold steady, the current balanced conditions are likely to persist. The wildcard: global economic disruptions (trade policy, recession fears, or inflationary surprises) could alter the rate trajectory.