Adnan El Zareef

The Bank of Canada today held its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%.

Canada's economy is showing signs of improvement. Growth is picking up and inflation is projected to ease gradually from its recent spike. There are still important risks and uncertainties related to the war in the Middle East and US trade policy.

Since the April Monetary Policy Report (MPR), global economic prospects have been dented by higher oil prices stemming from the Middle East conflict. At the same time, the build-out of artificial intelligence (AI) is supporting economic activity in a growing number of countries. Oil prices are still lower than their peak in April but the situation in the Middle East remains volatile. The path for global inflation is highly dependent on how the conflict unfolds.

The US economy is growing at about 2½%, mostly because of strong consumption and booming AI investment. China's economy is expanding solidly thanks to robust exports. Economic activity in the euro area has been weighed down by high energy prices, but is expected to strengthen in the second half of the year if energy prices come down as anticipated.

The Bank projects global GDP growth will slow to 2¾% in 2026, mostly because of the effects of the Middle East conflict, and recover to around 3¼% in 2027 and 2028.

Financial conditions in Canada have eased since April and global equity markets have been buoyant. US bond yields have risen, while those in Canada are little changed. This differential has contributed to the depreciation of the Canadian dollar.

Canada's GDP data over the past year was choppy and growth stalled as the economy adjusted to new tariffs, high uncertainty and slower population growth. Labour market conditions have remained soft, reflecting ongoing economic slack. The unemployment rate was 6.5% in June and has hovered in a range of 6½%-7% since the end of 2024. There are clear signs that economic growth has resumed in the second quarter, with growth estimated at 2½%. While this largely reflects the unwinding of temporary factors, sources of economic growth appear to be broadening.

Recent indicators point to continued solid consumer spending. Housing activity has been weak but looks to be stabilizing. Export growth has resumed and is expected to continue to strengthen, albeit on a lower path. Business investment is projected to pick up modestly, boosted in the near term by the oil and gas sector. Although the Canada-US-Mexico Agreement is now subject to annual reviews, more businesses report they are finding ways to navigate through the uncertainty. Government spending also contributes to higher economic activity over the projection.

Following GDP growth of 0.7% in 2026, the Bank projects the economy will grow by 1.8% in both 2027 and 2028. As the recovery proceeds, economic slack will be gradually absorbed.

CPI inflation rose further to 3.2% in May, mainly because of higher gasoline prices linked to the war in the Middle East. Excluding gasoline, inflation was 2.2% and measures of core inflation remained close to 2%. Near-term inflation expectations are sensitive to changes in gasoline prices but longer-term inflation expectations remain well anchored. War-related cost pressures are still working their way through some consumer prices but are being offset by downward pressure on other prices from continued economic slack. CPI inflation is expected to stay elevated in June and then ease gradually in the coming months, returning to around 2% in early 2027, although this forecast is dependent on the path for oil and gasoline prices. Inflation is forecast to average around 2% in 2027 and 2028, albeit with some monthly fluctuations because of base-year effects.

Governing Council judges the current policy rate remains appropriate to sustain the economic recovery and bring inflation back to the 2% target, in line with the MPR projections. Uncertainty is still high. Governing Council will continue to assess the strength of the Canadian economy and the outlook for inflation, and is prepared to adjust monetary policy as needed. The Bank is committed to maintaining Canadians' confidence in price stability through this period of global upheaval.

 Information note

The next scheduled date for announcing the overnight rate target is September 2, 2026. The Bank's next MPR will be released on October 28, 2026.

Source: Bank of Canada Website

Buying a first home in Canada is still a major financial decision. Higher home prices, mortgage qualification rules, down payment requirements, closing costs, and day-to-day affordability all matter. Recent federal mortgage changes may help some first-time buyers by creating more flexibility, especially when it comes to insured mortgages and longer amortization options.

At the same time, lower monthly payments do not automatically mean a home is affordable. A mortgage can look easier to manage month to month, while still costing more over the long term. That is why first-time buyers need to understand what these rules actually do, what they do not do, and how they may affect a buying decision.

The goal is not just to get approved. The goal is to buy responsibly, understand the payment, plan for renewal, and choose a mortgage structure that fits both today's budget and tomorrow's financial reality.

What Changed for First-Time Buyers in Canada?

Two major changes are especially important for first-time buyers. First, eligible first-time buyers may now have access to 30-year amortizations on insured mortgages. Second, the insured mortgage purchase price cap increased from $1 million to $1.5 million, effective December 15, 2024.

These changes matter because insured mortgages are commonly used by buyers with less than 20% down. In Canada, mortgage loan insurance is generally required when the down payment is below 20% of the purchase price. The higher insured mortgage cap means some buyers looking at homes above the previous $1 million limit may now have access to insured mortgage financing, subject to all lender and insurer requirements.

The expanded 30-year amortization rules may also reduce the required monthly mortgage payment for eligible borrowers. By stretching the repayment calculation over 30 years instead of 25 years, the scheduled payment can be lower. This may help with cash flow and qualification, but it also comes with an important trade-off.

What Is a 30-Year Amortization?

Amortization is the total length of time used to calculate how long it would take to fully repay the mortgage, assuming payments are made as scheduled and the interest rate remains consistent over each term. It is different from the mortgage term, which is the length of the contract with the lender.

For example, a buyer may choose a 5-year fixed mortgage term with a 25-year amortization, or a 5-year fixed mortgage term with a 30-year amortization if eligible. The term is the contract period. The amortization is the longer repayment schedule used to calculate the payment.

A 30-year amortization usually lowers the regular mortgage payment compared with a 25-year amortization on the same mortgage amount and interest rate. This can help some first-time buyers manage their monthly budget more comfortably.

However, because the mortgage is being paid down more slowly, the borrower can pay more interest over time. A lower payment can be helpful, but it should not be mistaken for a lower overall cost.

How Lower Payments Can Help First-Time Buyers

For some first-time buyers, the biggest challenge is not only the down payment. It is also the monthly payment. Between mortgage payments, property taxes, home insurance, utilities, maintenance, transportation, food, debt payments, and savings, the full cost of ownership can feel tight.

A longer amortization may help by reducing the required monthly mortgage payment. That lower payment can sometimes create more breathing room in the household budget.

This may be helpful for buyers who are financially responsible but need a little more payment flexibility. It may also help buyers who expect their income to grow over time but still want to be careful with cash flow in the early years of homeownership.

The key is to use the lower payment as a planning tool, not as a reason to overextend. A buyer should still ask whether the home is affordable after including the real costs of ownership.

Why Lower Payments Can Cost More Over Time

The main drawback of a longer amortization is that the mortgage balance is usually paid down more slowly. That can mean more total interest over the life of the mortgage.

This does not mean a 30-year amortization is always a bad choice. For some buyers, the added payment flexibility may be worth it. For others, a shorter amortization may be better because it can reduce total interest costs and build home equity faster.

First-time buyers should compare both options before deciding. The right choice depends on income, debt levels, down payment, savings, comfort with monthly payments, and long-term goals.

A buyer may also be able to choose a longer amortization for flexibility, then make extra payments later if the mortgage allows it. Prepayment privileges can be valuable, but they vary by lender and mortgage product. They should be reviewed before signing.

How the New Rules Can Affect Mortgage Rates

The first-time buyer rule changes do not directly set mortgage rates. Mortgage rates still depend on the lender, mortgage type, term length, borrower profile, property details, down payment, and whether the mortgage is insured, insurable, or uninsured.

An insured mortgage may be priced differently than an uninsured mortgage because mortgage loan insurance reduces some of the lender's risk. However, borrowers also pay a mortgage insurance premium, which is often added to the mortgage balance.

This is why comparing rates alone is not enough. A lower rate may still come with restrictions. A slightly higher rate may offer better flexibility. A longer amortization may lower the payment but increase long-term interest. The best mortgage is not always the one with the lowest advertised rate.

First-time buyers should review the total structure of the mortgage, including rate, term, amortization, payment, penalties, prepayment options, portability, and renewal flexibility.

How These Rules Affect Affordability

Affordability is more than approval. A lender may approve a mortgage based on income, debts, down payment, credit, and qualifying rules, but the borrower still needs to decide whether the payment works in real life.

A lower payment can improve cash flow, but buyers should still budget for the full cost of owning a home.

• Mortgage payment
• Property taxes
• Home insurance
• Utilities
• Condo fees, if applicable
• Repairs and maintenance
• Legal fees and closing costs
• Moving costs
• Emergency savings

The most comfortable purchase price is not always the maximum purchase price. First-time buyers should know their approved limit, but they should also know their preferred payment range.

A responsible mortgage plan should leave room for normal life events, such as vehicle repairs, job changes, family changes, home repairs, or future payment increases at renewal.

What About the First-Time Home Buyers' GST/HST Rebate?

The first-time home buyers' GST/HST rebate may also help some buyers purchasing a new home. This rebate is designed for eligible first-time buyers purchasing, building, or substantially renovating a qualifying home that will be used as their primary place of residence.

The federal rebate can provide relief on the GST, or the federal portion of the HST, for eligible new homes valued up to $1 million. For eligible homes valued between $1 million and $1.5 million, the rebate is reduced. At $1.5 million and above, the federal rebate is not available.

This rebate does not generally apply to standard resale homes. It is mainly relevant for eligible new construction, owner-built homes, and substantially renovated homes.

Buyers should not assume the rebate applies automatically. Eligibility depends on the buyer, the property, the purchase price, the use of the home, and the timing rules. Before relying on any rebate in a budget, it should be confirmed carefully.

How These Rules Affect Renewals

First-time buyers should think about renewal before they buy. In Canada, the mortgage term is usually shorter than the amortization. This means the mortgage will normally come up for renewal before it is fully paid off.

A buyer who chooses a 30-year amortization may enjoy a lower payment at the beginning, but that does not remove renewal risk. When the term ends, the borrower will need to renew, switch, or restructure the mortgage based on the options available at that time.

If interest rates are higher at renewal, the payment may increase. If rates are lower, there may be an opportunity to improve the payment or adjust the strategy. If income, credit, debt, or property value changes, the available choices may also change.

The best time to think about renewal is not a few days before the renewal date. It starts when the mortgage is first arranged. Buyers should understand how their term choice, amortization, payment, and lender conditions may affect their future options.

How These Rules Relate to Refinancing

The expanded first-time buyer amortization rules are mainly purchase-focused. They do not mean every existing homeowner can refinance into a new insured 30-year mortgage.

Refinancing is different from purchasing. It usually depends on available equity, income, credit, debts, property value, mortgage balance, lender rules, and any penalties or costs involved in changing the current mortgage.

For homeowners, refinancing may still be useful in certain situations. It may help consolidate debt, access equity for renovations, improve cash flow, or restructure finances. However, it should always be reviewed carefully because refinancing can also extend debt, increase total borrowing costs, or trigger penalties.

First-time buyers should understand this before buying. The mortgage structure chosen today can affect future flexibility. A mortgage that looks simple on day one may not be the best fit if the homeowner later wants to refinance, move, renovate, or consolidate debt.

What First-Time Buyers Should Review Before Making an Offer

Before making an offer, first-time buyers should have a clear mortgage plan. A pre-approval can be helpful, but the real value is in understanding the full picture.

• How much you may qualify to borrow
• What payment range feels comfortable
• How a 25-year amortization compares with a 30-year amortization
• How fixed and variable mortgage options compare
• How much mortgage insurance may cost
• How much money is needed for closing costs
• Whether a new home rebate may apply
• How the mortgage could look at renewal
• What happens if rates change before closing
• What documents the lender will require

Buyers should also avoid making major financial changes before closing. Taking on new debt, changing jobs, missing payments, increasing credit card balances, or moving down payment funds without documentation can affect mortgage approval.

The Bottom Line

The 2026 first-time buyer mortgage rules can create more flexibility for some Canadians. A 30-year amortization may lower the required monthly payment. A higher insured mortgage cap may open insured financing options for more buyers. The first-time home buyers' GST/HST rebate may help eligible buyers purchasing qualifying new homes.

But these changes do not remove the need for careful planning. Lower payments can still mean higher total interest. Rebates do not apply to every purchase. Approval does not always mean a home is comfortable to afford.

For first-time buyers, the smartest approach is to look beyond the maximum approval amount and focus on a mortgage that fits the full budget. The right mortgage plan should help you buy with confidence, manage the payment, prepare for renewal, and protect your long-term financial stability.

FAQs

Can first-time buyers get a 30-year mortgage in Canada?

Yes, eligible first-time buyers may qualify for a 30-year amortization on an insured mortgage. Buyers purchasing a new build may also qualify, provided all borrower, property, lender, and insurer requirements are met.

Does a 30-year amortization lower the mortgage payment?

Yes, a 30-year amortization can lower the required monthly payment compared with a 25-year amortization on the same mortgage amount and rate. However, it may also increase total interest paid over time.

Do first-time buyers still need to pass the stress test?

Yes, first-time buyers still need to qualify under Canada's mortgage stress test rules. Lenders review income, debts, credit, down payment, property details, and the qualifying rate before approving the mortgage.

Does the first-time home buyers' GST/HST rebate apply to resale homes?

No, the first-time home buyers' GST/HST rebate generally applies to eligible new homes, owner-built homes, or substantially renovated homes. It does not generally apply to standard resale homes.

Is a 25-year or 30-year amortization better for first-time buyers?

A 25-year amortization may reduce total interest and build equity faster. A 30-year amortization may lower the required payment and improve cash flow. The better option depends on the buyer's budget, income, savings, and long-term plans.

If your mortgage is coming up for renewal this year, you may be watching interest rate news more closely than usual. That makes sense. A renewal is not just paperwork from your lender, it is a chance to review your payment, your rate type, your mortgage term, your cash flow, and your long-term financial goals.

The Bank of Canada held its target overnight rate at 2.25% on June 10, 2026. For Canadian homeowners, that does not mean mortgage rates are frozen. It means the central bank is taking a cautious approach while it watches inflation, employment, economic growth, energy prices, and broader uncertainty.

This matters because inflation is one of the biggest forces behind interest rate decisions. When inflation stays higher than expected, lenders and financial markets may remain cautious. When inflation clearly cools, borrowing costs may have more room to ease. For someone renewing a mortgage, even a small difference in rate can affect monthly payments, household cash flow, and how comfortable the next few years feel.

What Inflation Means in Plain Language

Inflation means the cost of goods and services is rising over time. For homeowners, it often shows up in everyday places, groceries, fuel, utilities, insurance, property taxes, home repairs, and other household expenses. Even when inflation is lower than it was during the peak of the recent rate cycle, it can still put pressure on family budgets.

Statistics Canada reported that the Consumer Price Index increased 2.8% year over year in April 2026, up from 2.4% in March. That does not mean every household is experiencing the same level of inflation. Some families may feel more pressure depending on where they live, how much they drive, whether they rent part of their home, and how much of their income goes toward food, energy, debt, and housing costs.

For mortgage planning, the important point is simple. Inflation affects interest rate expectations, and interest rate expectations affect mortgage pricing. That is why homeowners should not base a renewal decision on headlines alone. The better approach is to compare real options, understand the payment impact, and choose a mortgage structure that fits your budget.

How Inflation Can Affect Mortgage Rates

Mortgage rates do not all move the same way. Variable-rate mortgages are more directly connected to lender prime rates, which are influenced by Bank of Canada policy rate decisions. Fixed mortgage rates are more closely tied to bond yields, lender funding costs, competition among lenders, and expectations about where inflation and interest rates may go next.

This is why a Bank of Canada rate hold does not always create a simple result for mortgage shoppers. Variable rates may stay relatively steady if prime rates do not change. Fixed rates can still move up or down depending on bond market conditions and lender pricing.

If you are renewing, this is where strategy matters. The lowest advertised rate is not always the best mortgage. The right choice may depend on your remaining amortization, income stability, debt level, prepayment plans, penalty exposure, property plans, and whether you need flexibility in the next few years.

Why You Should Not Automatically Sign Your Lender's Renewal Offer

Many homeowners receive a renewal offer from their current lender and feel pressure to sign quickly. The process can feel convenient, especially when the offer arrives with a simple form or online button. But convenience is not always the same as value.

Your renewal is one of the few natural opportunities to review your mortgage without necessarily breaking your term early. Before signing, it is worth comparing your lender's offer against other available options. A mortgage professional can help you understand whether your current lender is being competitive, whether another lender may be a better fit, and whether switching makes sense after considering rate, features, approval requirements, and possible costs.

This is especially important when inflation and rates are still top of mind. The decision is not only fixed versus variable. You may also need to compare shorter versus longer terms, payment frequency, prepayment privileges, portability, penalty structure, and whether you want payment certainty or more flexibility.

If your mortgage is approaching maturity, it may be a good time to review your mortgage renewal options before accepting the first offer from your lender.

Fixed or Variable, Which One Makes Sense Right Now?

There is no one-size-fits-all answer. A fixed rate may appeal to homeowners who want payment certainty and less stress around future rate announcements. A variable rate may appeal to homeowners who are comfortable with some movement and want the possibility of benefiting if rates fall later.

A fixed mortgage can be helpful if your household budget is already tight, if your income varies, or if you prefer knowing exactly what your payment will be for the full term. That certainty can make financial planning easier, especially when other costs are also rising.

A variable mortgage can still make sense for certain borrowers, but it requires comfort with uncertainty. If the Bank of Canada holds rates for longer than expected, or if inflation keeps markets cautious, the benefit may not arrive as quickly as hoped. If rates move lower later, a variable option may become more attractive, but the timing is never guaranteed.

The right decision should come from a payment comparison, not a prediction. Ask what happens if your payment stays the same, if rates fall more slowly than expected, or if your budget changes. A good renewal strategy should still work if the market takes longer to improve.

How Renewals Can Affect Monthly Cash Flow

A renewal can change your monthly payment depending on your new rate, remaining amortization, mortgage balance, payment frequency, and term choice. If your previous mortgage rate was much lower than current market rates, your payment may rise at renewal. If your balance has been reduced and you are renewing into a competitive rate, the payment change may be more manageable.

This is why it is useful to look at the full picture before making a decision. A slightly lower rate can help, but the structure of the mortgage also matters. For example, a homeowner who expects to sell within two years may care more about penalty flexibility than a homeowner who plans to stay in the same home for a long time.

Your renewal is also a chance to review whether your mortgage still matches your life. Since your last term, your income may have changed, your debts may have changed, your family needs may have changed, or your plans for the property may have changed. A mortgage that fit well five years ago may not be the best fit today.

When Refinancing Should Be Part of the Conversation

A renewal and a refinance are not the same thing. A renewal usually means replacing the expiring mortgage term with a new term. A refinance usually means changing the mortgage amount, amortization, or structure, often to access equity, consolidate debt, fund renovations, or adjust monthly cash flow.

Refinancing can be useful, but it should be reviewed carefully. It may involve qualification, legal work, appraisal requirements, and possible costs. It can also reset or extend the repayment timeline, which may reduce monthly payments but increase total interest over time.

In an inflation-sensitive rate environment, refinancing should be goal-based. The question is not simply, "Can I get a lower payment?" The better question is, "Does this improve my overall financial position in a responsible way?"

For some homeowners, refinancing may help consolidate higher-interest debt into one structured payment. For others, it may help fund necessary renovations or create breathing room in the budget. The key is to compare the short-term monthly relief against the long-term cost. You can learn more about available mortgage refinancing options if your current mortgage no longer fits your needs.

How Affordability Fits Into Renewal Planning

Affordability is not just a first-time buyer issue. Existing homeowners also need to think about affordability when renewing. Groceries, utilities, insurance, property taxes, debt payments, and family expenses all compete for room in the same household budget.

This is why payment comfort matters. A mortgage payment that looks manageable on paper may feel very different when other costs rise. If inflation continues to pressure everyday expenses, homeowners may want to be more conservative with their payment assumptions and avoid stretching the budget too tightly.

CMHC reported that the six-month trend in housing starts was virtually flat in May 2026. Housing supply conditions can affect affordability in many communities, especially where demand remains strong and available homes are limited. For buyers and renewing homeowners, this reinforces the importance of planning carefully rather than relying only on broad market headlines.

If you are thinking about buying while also watching rate news, getting a clear mortgage pre-approval can help you understand your real budget before you make an offer.

The Stress Test Still Matters for Many Borrowers

Canada's mortgage stress test remains an important part of qualification. For uninsured mortgages, OSFI lists the minimum qualifying rate as the greater of the mortgage contract rate plus 2%, or 5.25%.

In plain language, that means you may need to qualify at a higher rate than the one you actually pay. This is designed to make sure borrowers can handle future financial pressure, such as higher costs, reduced income, or higher interest rates.

At renewal, the stress test may not apply the same way in every situation. OSFI says federally regulated lenders are not expected to apply the minimum qualifying rate for uninsured straight switches at renewal when there is no increase to the loan amount or amortization period.

The details matter. Before assuming you cannot switch, refinance, or negotiate, it is worth reviewing your specific mortgage, income, property value, debt level, and lender options with a qualified mortgage professional.

What Homeowners Should Do Before Renewal

If your mortgage renewal is coming up, do not wait until the last week. The more time you give yourself, the more options you can compare. A rushed renewal often favours convenience, while an early review gives you room to make a more confident decision.

• Review your current mortgage balance, rate, payment, maturity date, and remaining amortization.
• Ask your current lender for renewal options, but do not assume that is your only choice.
• Compare fixed, variable, and shorter-term options based on payment comfort and flexibility.
• Check whether refinancing makes sense if you have debts, renovations, or cash flow concerns.
• Review prepayment privileges, penalties, portability, and payment frequency before signing.
• Speak with a mortgage professional before your maturity date so you understand your options clearly.

A Practical Strategy for This Summer

The best strategy this summer is not to chase predictions. It is to build a mortgage plan that can handle a few different outcomes. Inflation may ease gradually. The Bank of Canada may remain cautious. Fixed rates may move differently than variable rates. Your household budget may also change.

A strong renewal strategy should answer three questions. First, what payment can you comfortably afford? Second, how much rate risk are you willing to accept? Third, how much flexibility do you need over the next few years?

Once those answers are clear, the mortgage choice becomes easier. You can compare terms, rates, lenders, and features based on your real goals instead of reacting to every economic headline.

If you are unsure where to start, working with a mortgage broker can help you compare lenders, understand your options, and avoid signing a renewal that may not fit your needs. Learn more about why using a mortgage broker can help when rate decisions, renewal offers, and affordability pressures all overlap.

Final Thoughts

Inflation does not mean homeowners should panic. It does mean renewal decisions deserve attention. The rate you choose, the term you select, and the structure of your mortgage can all affect your monthly budget and long-term financial comfort.

If your mortgage is renewing soon, take the time to compare your options before you sign. A thoughtful renewal strategy can help you protect cash flow, manage uncertainty, and choose a mortgage that fits the next stage of your life.

FAQs

Should I renew my mortgage early if inflation is still affecting rates?

It may be worth reviewing your options early, especially if your renewal is within the next few months. Early planning gives you time to compare rates, terms, and lender options before your maturity date. Whether you should renew early depends on your current rate, available offers, possible penalties, and your comfort with payment changes.

Does a Bank of Canada rate hold mean mortgage rates will stay the same?

Not necessarily. Variable rates are more directly connected to lender prime rates, which are influenced by Bank of Canada decisions. Fixed rates can still move because they are affected by bond yields, lender funding costs, competition, and inflation expectations.

Is a fixed mortgage better than a variable mortgage during inflation?

A fixed mortgage may be better if you want payment certainty and less exposure to future rate changes. A variable mortgage may suit borrowers who are comfortable with uncertainty and want flexibility if rates move lower later. The best choice depends on your budget, risk tolerance, and plans for the property.

Can I switch lenders at renewal without being stress-tested?

In some uninsured straight-switch renewal situations, federally regulated lenders are not expected to apply the minimum qualifying rate if there is no increase to the loan amount or amortization period. Rules can vary by situation, so it is important to confirm your options before assuming you must stay with your current lender.

When should refinancing be considered instead of a simple renewal?

Refinancing may be considered if you want to access home equity, consolidate higher-interest debt, fund renovations, or restructure payments. It should be reviewed carefully because it may involve qualification, costs, and long-term interest considerations. A simple renewal may be better if you only need a new term and your mortgage amount is not changing.

The Bank of Canada today held its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%.

The conflict in the Middle East is now in its fourth month. The resulting increases in energy prices and disruptions in global supply chains are weighing on global economic growth and pushing up inflation. At the same time, the US administration continues to propose new tariffs and trade policy uncertainty remains elevated.

In the United States, economic growth remains solid, supported by consumption and AI‑related investment. In the euro area, growth is subdued, with higher energy prices weighing on activity. China's economic growth continues to be supported by strong exports.

Canadian financial conditions have loosened since the April Monetary Policy Report. Global equity markets have been buoyant and bond yields remain volatile. The Canadian dollar has weakened against the US dollar and other currencies.

In Canada, GDP edged down by 0.1% in the first quarter, weaker than expected at the time of the April MPR. Consumer spending grew 1.4% but government spending unexpectedly declined. Housing activity also declined and business investment remained weak. Exports fell while imports rose strongly as inventories were rebuilt. Employment was up in May, but looking through monthly volatility, employment in Canada is little changed since the start of the year. The unemployment rate continues to fluctuate in the 6 ½%-7% range with the most recent reading at 6.6% in May.

Recent data suggests that growth will resume in the second quarter but, even with some rebound, the economy is expected to remain in excess supply.  

As expected, CPI inflation rose in April, reaching 2.8%. The increase reflects energy prices, both higher oil prices and the impact of the elimination of the consumer carbon tax falling out of the 12-month rate of inflation. So far, there has been limited evidence of broad-based pass-through of higher energy prices to other consumer prices. Measures of core inflation have moved down to around 2% and the share of CPI components growing above 3% is close to its historical average. Food price inflation moderated but remains high, and shelter inflation continued to slow. With global oil prices still elevated-roughly $10 a barrel above our April MPR assumptions-total inflation is expected to hover around 3% in the near term before easing gradually towards 2%.

Against this overall backdrop, Governing Council decided to maintain the policy rate at 2.25%.  Economic activity in Canada has been weak and uncertainty about US trade policy persists. The conflict in the Middle East is ongoing and oil prices remain elevated. Governing Council is continuing to look through the war's near-term impact on headline inflation, but will not let higher energy prices become persistent inflation. As the outlook evolves, we stand ready to respond as needed. The Bank is committed to maintaining Canadians' confidence in price stability through this period of global upheaval.

Information note

The next scheduled date for announcing the overnight rate target is July 15, 2026. The Bank's next MPR will be released at the same time.

Source: Bank of Canada Website

Buying a first home in Canada has not been easy. Between higher home prices, changing mortgage rates, stricter qualification standards, and the rising cost of everyday life, many first-time buyers have been left wondering if homeownership is still within reach.

The federal first-time home buyers' GST/HST rebate is designed to help with one important part of the equation, the upfront cost of buying a newly built or substantially renovated home. For eligible first-time buyers, this rebate can reduce the GST, or the federal portion of the HST, on qualifying new homes.

This does not magically make every home affordable. It does not replace good mortgage planning, and it does not change the need to qualify with a lender. However, for buyers looking at new construction, builder homes, new condos, owner-built homes, or qualifying co-operative housing, it may make a meaningful difference in the overall cost of getting into the market.

Here is what Canadian homebuyers need to know, in plain language.

What Is the First-Time Home Buyers' GST/HST Rebate?

The first-time home buyers' GST/HST rebate is a federal rebate for eligible first-time buyers purchasing or building a qualifying new home in Canada.

For homes valued at $1 million or less, the rebate can recover up to 100% of the GST, or the federal portion of the HST, up to a maximum rebate of $50,000. For homes valued between $1 million and $1.5 million, the maximum rebate is gradually reduced. For homes valued at $1.5 million or more, the rebate is not available.

In simple terms, the rebate is meant to lower the tax cost attached to buying a new home. That can matter because taxes, closing costs, legal fees, adjustments, moving costs, and other upfront expenses can put pressure on buyers before they even make their first mortgage payment.

Why This Matters Right Now

This rebate matters right now because affordability remains one of the biggest concerns for Canadian homebuyers. Even with some relief in interest rates compared with the peak of the rate cycle, many households are still balancing higher monthly payments, elevated home prices, and limited housing supply in many communities.

For first-time buyers, this means the rebate should be viewed as a useful tool, not the entire strategy. It may improve the numbers on a qualifying new home purchase, but the bigger picture still includes mortgage approval, monthly payment comfort, future renewal risk, and whether the home fits your long-term financial plan.

Who May Qualify for the Rebate?

Eligibility depends on the buyer, the property, the timing, and how the home will be used. In general, the rebate is targeted to first-time home buyers who are purchasing or building a new home as their primary place of residence.

• Being at least 18 years old.
• Being a Canadian citizen or permanent resident of Canada.
• Not having lived in a home that you, your spouse, or your common-law partner owned as a primary residence in the calendar year or in the previous four calendar years.
• Not having previously received this first-time home buyers' GST/HST rebate.

The property must also meet requirements. The rebate may apply to a newly built or substantially renovated home purchased from a builder, an owner-built or substantially renovated home, or a qualifying share in a co-operative housing corporation.

In most cases, the home must be used as your primary place of residence. This is important. The rebate is not designed for investors buying a rental property. It is intended to support eligible first-time buyers purchasing a home to live in.

How Much Could the Rebate Be Worth?

The maximum rebate is up to $50,000, but not every buyer will receive that amount. The actual value depends on the price of the home and whether all eligibility requirements are met.

• For an eligible new home valued at $1 million or less, the rebate may recover up to 100% of the GST, or federal portion of the HST, up to $50,000.
• For an eligible new home valued between $1 million and $1.5 million, the rebate is gradually reduced.
• For a home valued at $1.5 million or more, the rebate is not available.

That type of savings can be meaningful. It may help reduce the cash needed at closing, improve your ability to manage other purchase costs, or make a new build easier to compare with a resale home. However, it should not be treated as guaranteed until eligibility is confirmed.

How This Can Affect Mortgage Affordability

The rebate can help affordability, but it is important to understand how it fits into the mortgage process.

Mortgage affordability is usually based on your income, debts, credit profile, down payment, property costs, and qualifying interest rate. Lenders want to know whether you can carry the mortgage payment, property taxes, heating costs, condo fees where applicable, and any other debt obligations.

The rebate may help by lowering the effective cost of the new home purchase. It may also free up cash that would otherwise be tied to tax costs. But the rebate does not automatically increase the mortgage amount a lender will approve. A buyer still needs to meet lender guidelines.

That is why a proper mortgage pre-approval is so important before signing an agreement with a builder. New construction purchases can involve deposits, delayed closings, assignment restrictions, upgrade costs, occupancy fees for some condos, and changing market conditions between purchase and completion.

What This Means for First-Time Buyers Looking at New Builds

For first-time buyers, the rebate may make a newly built home more attractive, especially when comparing a new build against a resale property.

A new home may offer modern layouts, energy-efficient features, lower immediate repair needs, and builder warranties. At the same time, new builds can come with unique costs and risks. Buyers need to review the full purchase agreement carefully and understand what is included, what is extra, and when payments are due.

For many buyers, the key question is not simply, "Can I get the rebate?" The better question is, "Does this home still fit my total mortgage plan after the rebate is considered?"

• Your down payment and closing cost funds.
• Your monthly mortgage payment comfort level.
• Your expected property taxes and condo fees, if applicable.
• Your timeline from purchase agreement to closing.
• Your ability to handle a future renewal if rates change.
• Your longer-term goals, such as growing your family, changing jobs, or moving again in a few years.

How This Connects to 30-Year Amortizations

Another important affordability tool is the availability of 30-year amortizations for insured mortgages for first-time buyers and buyers of new builds, subject to lender and insurer rules. A longer amortization can reduce the monthly payment compared with a shorter amortization, although it may increase the total interest paid over the life of the mortgage.

This can be helpful for buyers who are trying to manage monthly cash flow, especially when purchasing a first home. When combined with the GST/HST rebate, a qualifying buyer may see both upfront cost relief and a lower monthly payment structure.

However, this needs to be reviewed carefully. A lower payment is helpful, but it should not encourage a buyer to stretch beyond a comfortable budget. The goal is not just to get approved. The goal is to own the home in a way that remains manageable through normal life changes, including renewal, repairs, income changes, and family expenses.

What About Mortgage Rates?

The rebate itself does not set mortgage rates. Mortgage rates are influenced by factors such as Bank of Canada policy, bond yields, lender competition, inflation expectations, and the borrower's overall risk profile.

For first-time buyers, the key takeaway is that affordability should be tested against today's rates and against possible future changes. Even if the rebate improves the purchase numbers, buyers should still ask how the payment looks at renewal, what happens if income changes, and whether a fixed or variable mortgage fits their comfort level.

A mortgage professional can help compare different options, including insured versus conventional financing, fixed versus variable terms, shorter versus longer terms, and the impact of different amortization periods.

Does This Help With Renewals or Refinancing?

The first-time home buyers' GST/HST rebate is mainly a purchase-focused measure for eligible new homes. It is not a renewal rebate, and it is not designed to help existing homeowners refinance their current property.

That said, it can still influence the broader mortgage conversation. First-time buyers who purchase today will eventually renew. The decisions made at the beginning, including mortgage amount, amortization, term choice, and payment strategy, can affect future flexibility.

For current homeowners, the rebate does not directly apply unless they meet the eligibility rules for a qualifying new home purchase or build. Homeowners who are already in the market and feeling payment pressure may need a different strategy, such as reviewing renewal options, consolidating debt through a refinance, or adjusting mortgage structure where appropriate.

For those situations, a conversation about mortgage renewals or mortgage refinancing may be more relevant than the first-time buyer rebate.

Why You Should Get Advice Before Relying on the Rebate

Government rebates can be valuable, but they also come with specific rules. Timing, buyer status, property type, occupancy, purchase agreement dates, construction timelines, and application requirements can all matter.

If you are buying from a builder, the builder may credit the rebate to you and submit the application, depending on the arrangement. If the builder does not credit the rebate, you may need to apply yourself. CRA guidance also notes there are time limits to apply, often tied to when ownership or possession is transferred.

This is why you should not rely on a rebate estimate alone when deciding whether to purchase. Before you sign, confirm the mortgage side, the tax side, and the contract side. Your mortgage professional, lawyer, accountant, and builder can all play different roles in helping you understand the full picture.

The Bottom Line for Canadian First-Time Buyers

The first-time home buyers' GST/HST rebate is a meaningful affordability measure for eligible buyers purchasing or building a qualifying new home. For homes up to $1 million, the rebate can be worth up to $50,000. For homes between $1 million and $1.5 million, the rebate is reduced. For homes at or above $1.5 million, it does not apply.

For buyers considering a newly built home, this may improve affordability and make the numbers more manageable. But it should be treated as one part of a larger mortgage plan, not the whole plan.

Before moving forward, get clear on your eligibility, your down payment, your closing costs, your monthly comfort level, and your long-term mortgage strategy. A rebate can help reduce cost, but the right mortgage plan helps protect your financial confidence after you move in.

If you are thinking about buying your first home, start with a proper first-time buyer mortgage review and compare your options before you sign a purchase agreement.

FAQs

Who qualifies for the first-time home buyers' GST/HST rebate?

You may qualify if you are an eligible first-time home buyer, are at least 18 years old, are a Canadian citizen or permanent resident, and are buying or building a qualifying new home as your primary place of residence. Other conditions also apply, including ownership history and property-specific rules.

How much is the first-time buyer GST/HST rebate worth?

For an eligible new home valued at $1 million or less, the rebate can recover up to 100% of the GST, or federal portion of the HST, up to a maximum of $50,000. The rebate is reduced for homes between $1 million and $1.5 million and is not available for homes at or above $1.5 million.

Does the rebate apply to resale homes?

No. The rebate is focused on qualifying new or substantially renovated homes, including certain homes purchased from builders, owner-built homes, and qualifying co-operative housing. It is not designed for a typical resale home purchase.

Will the rebate help me qualify for a larger mortgage?

Not necessarily. The rebate may reduce the overall cost of buying a qualifying new home, but lenders still qualify you based on income, debt, credit, down payment, property costs, and mortgage rules. It may improve your cash position, but it does not replace mortgage approval.

Should I get pre-approved before relying on the rebate?

Yes. A mortgage pre-approval helps you understand what you may be able to afford before you commit to a new build purchase. You should also confirm rebate eligibility with the appropriate professionals, because timing, property type, occupancy, and application rules can affect whether you qualify.

More homes being built in Canada should be encouraging news for homebuyers. More supply can support a healthier housing market over time and may gradually create more opportunities for Canadians who want to purchase a home.

However, the number of new homes being built does not tell the whole story. Buyers also need to understand what types of homes are being added, where they are being built and whether those homes match the needs and budgets of people who want to own rather than rent.

According to the Canada Mortgage and Housing Corporation's Spring 2026 Housing Supply Report, housing construction increased by 6% year over year in 2025, reaching 259,000 units. That is meaningful progress. At the same time, CMHC reported that rental construction drove much of the growth, while ownership-oriented construction weakened overall.

For Canadians hoping to buy a condominium, townhouse or family home, this distinction matters. More overall housing supply does not automatically mean more suitable ownership choices are becoming available at affordable prices.

Why the Type of New Housing Matters to Buyers

Housing supply is not one single category. A new purpose-built rental apartment may help renters and improve the overall housing system, but it is not a home that a buyer can purchase. In the same way, a small condominium unit may not meet the needs of a growing family looking for more bedrooms, outdoor space or long-term stability.

CMHC reported that rental construction remained a major source of new supply in 2025. It also found that missing middle housing, such as row homes, stacked townhouses, multiplexes and low-rise apartments, continued to expand in several markets. These types of homes can be important because they may provide more attainable choices than detached houses in expensive communities.

Yet CMHC also identified pressure in the ownership market. Condominium presales declined significantly, unsold inventories increased and financing conditions became more difficult for some projects. These issues can affect whether future ownership-focused developments move ahead, especially in markets such as Toronto and Vancouver.

For prospective buyers, the key message is simple: the housing market may be adding homes, but the property type you need may still be limited in your preferred neighbourhood or price range.

Construction Growth Does Not Automatically Solve Affordability

A larger housing supply can contribute to improved affordability over the long term, but it does not immediately remove the financial challenges buyers face today. Purchasing a home still depends on your income, down payment, monthly debt payments, mortgage qualification and the cost of borrowing.

Construction costs also remain part of the affordability picture. Statistics Canada reported that residential building construction costs increased 0.6% in the first quarter of 2026. Year over year, residential construction costs were up 2.8% across the 15 census metropolitan areas included in its composite measure.

Higher construction costs do not automatically translate into the same increase in every home's selling price. However, they can make it more challenging for builders to produce new ownership housing at prices that are manageable for first-time buyers and move-up buyers.

This is one reason affordability can remain difficult even during a period when housing starts appear positive. Buyers may see new cranes, new developments and new listings, but still struggle to find the right home at a monthly payment they can comfortably carry.

What This Means for Mortgage Rates and Your Buying Budget

Housing supply is only one part of a homebuyer's decision. Mortgage rates have a direct impact on how much a household can afford and what the monthly payment will look like.

On April 29, 2026, the Bank of Canada held its policy interest rate at 2.25%. The policy rate is particularly relevant to variable-rate borrowing and lines of credit, while fixed mortgage rates are also influenced by bond yields, lender pricing and broader financial market conditions.

For buyers, this means it is important not to assume that increased housing supply will automatically create an easier purchasing environment. Even when there are more listings or newly built properties available, your mortgage rate can significantly affect your qualifying amount and monthly budget.

A buyer considering a newly built condominium, townhouse or detached home should review more than the purchase price. Property taxes, condominium fees where applicable, insurance, heating costs, closing expenses and the mortgage payment should all be assessed together.

Getting a clear mortgage review before making an offer can help you understand what you may qualify for, what payment level feels comfortable and whether a fixed or variable mortgage strategy suits your financial situation.

Why Buyers Should Not Assume Waiting Will Solve Everything

Some buyers may decide to wait because they believe more new construction will eventually create lower prices or significantly more choice. Waiting may be the right decision for some households, especially if they need more time to build a down payment, improve credit or reduce other debt.

However, no buyer should assume that waiting guarantees a better outcome. CMHC's reporting suggests that Canada's supply picture is uneven. Rental construction has been strong, but the pipeline of ownership-oriented housing faces challenges in some large markets.

A practical decision should be based on your finances and goals rather than trying to predict the perfect market. A home purchase may make sense when you have stable income, manageable debts, adequate savings and a property that fits both your lifestyle and long-term budget.

How Mortgage Rule Changes May Help Some Buyers

Federal mortgage rule changes introduced in December 2024 remain relevant for buyers considering a purchase in 2026. The federal government increased the price cap for insured mortgages from $1 million to $1.5 million, which may allow certain buyers purchasing below $1.5 million to buy with less than a 20% down payment, provided they otherwise qualify.

The government also expanded eligibility for 30-year insured mortgage amortizations to all first-time homebuyers and to buyers purchasing newly built homes. A longer amortization can reduce the required monthly mortgage payment compared with a shorter amortization, although it also means paying interest over a longer period if the mortgage remains in place for the full schedule.

These changes may be especially relevant for a first-time buyer evaluating a new build. However, a longer amortization or insured mortgage option does not automatically make a home affordable. Buyers still need to qualify under applicable lending requirements and ensure the payment fits comfortably within their household budget.

What Current Homeowners Should Know About Renewals and Refinancing

Housing supply does not only matter to buyers. Existing homeowners may also be watching local prices and supply levels while considering a renewal, refinance or future move.

CMHC's Spring 2026 Residential Mortgage Industry Report found that mortgage renewal activity dominated the mortgage market in 2025. Renewal volumes are expected to ease in 2026, but CMHC noted that borrowers renewing after a five-year term may still face a similar interest-rate adjustment to those who renewed in 2025.

For homeowners approaching renewal, this makes early preparation important. Reviewing your mortgage several months before maturity can provide time to compare payment options, consider whether you need to consolidate higher-interest debt and understand whether refinancing would improve or strain your overall cash flow.

Homeowners who are considering selling and purchasing another property should also be careful about relying on national housing headlines. Your ability to move depends on the value and marketability of your current home, the type of home you want to purchase and the mortgage financing available for your next step.

Questions Homebuyers Should Ask Before Purchasing in 2026

The current market rewards buyers who are prepared. Rather than focusing only on whether overall housing supply is increasing, buyers should consider the financial and practical details that affect their own purchase.

• What monthly mortgage payment can I comfortably afford, not just qualify for?
• Do I have sufficient funds for the down payment, closing costs and an emergency reserve?
• Am I considering a resale home, a newly built home or both?
• Would a fixed-rate or variable-rate mortgage better suit my risk tolerance and timeline?
• Am I eligible for an insured mortgage or a 30-year amortization option?
• Does the available housing in my preferred area actually match my family's needs?
• How would my budget change if rates, property taxes or condominium fees increased?

Working through these questions before actively shopping can help you avoid becoming attached to a property that does not make financial sense. It can also help you make a more confident decision when the right home becomes available.

The Bottom Line for Canadian Homebuyers

Canada's increase in housing starts is a positive step, especially as more rental and missing middle housing is added to communities. However, homebuyers should understand that a rising number of housing starts does not necessarily mean an immediate increase in affordable homes available for purchase.

In 2026, buying a home still requires careful attention to property type, location, mortgage rates, qualification rules and long-term payment affordability. The best first step is not trying to predict every market movement. It is understanding your own budget, financing options and homeownership goals before you make a purchase decision.

Frequently Asked Questions

1. Does more housing construction mean home prices will fall in Canada?

Not necessarily. More housing supply can help support affordability over time, but prices are also affected by location, property type, buyer demand, mortgage rates, employment conditions and construction costs. New rental construction may improve the overall market without immediately increasing the number of homes available for purchase.

2. Are there more homes available for Canadian first-time buyers in 2026?

Some markets are adding new housing, including townhouses, low-rise homes and condominiums. However, CMHC has reported that ownership-oriented construction weakened overall in 2025, while much of the growth in new supply came from rental construction. Availability can vary considerably by city and property type.

3. Can I get a 30-year mortgage amortization when buying a new home?

Eligible buyers purchasing a newly built home may qualify for a 30-year insured mortgage amortization. First-time homebuyers may also be eligible for this option. Qualification depends on the property, down payment, mortgage insurance requirements, income, credit and lender approval.

4. How do mortgage rates affect affordability when buying a home?

Mortgage rates affect both the payment you will make and the amount you may qualify to borrow. A higher rate generally increases the monthly cost of financing and may reduce purchasing power, while a lower rate may improve affordability. Buyers should review payment scenarios before committing to a purchase.

5. Should I speak with a mortgage professional before looking at new construction?

Yes. New construction purchases can involve deposit schedules, completion timelines, mortgage approval conditions and changing interest-rate considerations. A mortgage review can help you understand your budget, qualification options and whether the planned purchase is financially manageable before you commit.

Sources

• Canada Mortgage and Housing Corporation, Spring 2026 Housing Supply Report
• Canada Mortgage and Housing Corporation, Residential Mortgage Industry Report, Spring 2026 Edition
• Bank of Canada, April 29, 2026 Policy Interest Rate Decision
• Statistics Canada, Building Construction Price Indexes, First Quarter 2026
• Department of Finance Canada, Mortgage Reforms Effective December 15, 2024