Canadian Mortgage Market 2023: The Grinding Year

After the whiplash of 2022, many expected 2023 to bring clarity. It did not. Instead, the Canadian mortgage market spent the year in a slow grind: rates climbed to their highest level in over two decades, sales volumes stayed depressed, and yet, to the frustration of would-be buyers waiting for a correction, home prices largely refused to fall. Immigration surged. Supply stayed tight. And the question everyone kept asking got no definitive answer by year end: when will rates come down?

As December 2023 closed, nobody knew yet. This article has been updated as of October 2026 to mark clearly, in its own section near the end, what actually happened afterward. Everything else below reflects what was known and verifiable as of the original December 2023 publish date.

The Rate Peak: Two Surprise Hikes and a Hold

The Bank of Canada entered 2023 with the overnight rate at 4.25% after a final 50 basis point hike in December 2022. It raised to 4.50% on January 25 and then paused, signaling a conditional hold while it assessed the impact of 425 basis points of cumulative tightening.12

Markets exhaled. The pause lasted four months. Then the Bank surprised nearly everyone with a 25 basis point hike on June 7 to 4.75%, citing an economy that was "stronger than expected" and inflation that remained too high. Another 25 basis point hike followed on July 12, bringing the overnight rate to 5.00%.34

That was the peak. The Bank held at 5.00% through October 25 and December 6, as the economy slowed and inflation pressures eased, but without committing to cuts.56

Borrowers continued to strongly favour fixed-rate mortgages over variable through the year. CMHC data showed the share of new lending at terms of three to five years rising steadily, while the share of variable-rate lending fell, through the first eight months of 2023, a shift driven by the rate gap between the two products and by concerns about further hikes.7

Why Prices Held Despite the Highest Rates in 20 Years

This was the puzzle of 2023. Rates were at their highest in over two decades. Outstanding residential mortgage debt kept growing, but much more slowly than during the highly active 2021-2022 period: it reached $2.14 trillion by August 2023, up 3.4% from a year earlier. At chartered banks, new lending for the purchase of property fell 44% and refinances fell 34%, both compared with the same period in 2022.7 And yet, as CMHC noted, home prices were rising again after a temporary drop earlier in 2023.

The explanation is supply, or rather the lack of it. By October 2023, CREA's sales-to-new-listings ratio, a measure of how tight the market is, had fallen to 49.5%, a 10-year low, well under the association's long-term average of 55.1%.8 At the same time, population growth was unprecedented: Statistics Canada reported the population grew by 1,158,705 people (2.9%) in the 12 months to July 1, 2023, with close to 98% of that growth coming from international migration, the fastest pace in a 12-month period since 1957.9

The math is straightforward: when well over a million people arrive and the pool of homes for sale is shrinking, prices do not fall even if borrowing capacity has been slashed. Sales volumes collapse because fewer people can afford to buy, but prices hold because anyone who can buy faces intense competition for limited supply.

The Renewal Wave and the Supply Gap

The story that would define the next few years began building in 2023. CMHC's Fall 2023 report, released November 9, found that more than 290,000 fixed-rate mortgage borrowers had already renewed with a chartered bank at a significantly higher rate in just the first half of the year, and flagged the renewal wave as a growing risk to the housing finance system. The household debt-to-income ratio reached 171.9% in the second quarter of 2023, and about one in three outstanding mortgages carried a variable rate, meaning the rate had already moved with every Bank of Canada hike.7

A large share of mortgages taken out during the low-rate years of 2020 to 2022 were still ahead of their renewal date as 2023 ended. How large that remaining wave would turn out to be, and how it played out, is covered in the update near the end of this article.

Immigration and the Supply Gap

Canada's record immigration levels in 2023 became the most debated housing variable of the year. The country added population at a pace unseen since 1957, and the housing system was not built to absorb it that quickly.9

With more people needing homes and fewer homes listed for sale, competition for the available housing stock was intense.

The debate around immigration and housing intensified throughout the year. Population growth was one force on the demand side; limited supply was the other.

The Canadian Mortgage Charter

In response to growing concerns about the renewal wave, the federal government announced the Canadian Mortgage Charter in the 2023 Fall Economic Statement on November 21, 2023. The Charter is not legislation, it is a set of expectations placed on federally regulated lenders to help borrowers facing renewal shock.10

Key provisions include:

• Lenders should allow temporary extensions of the amortization period for mortgage holders at risk.
• Fees and costs that would otherwise be charged for relief measures should be waived.
• Insured mortgage holders should not have to requalify under the insured minimum qualifying rate when switching lenders at renewal.
• Lenders should contact homeowners four to six months in advance of their renewal to explain their renewal options.

The practical impact remained to be seen at year end. The Charter's value may lie more in its signaling function, telling borrowers that help is available, than in new obligations it creates.

A Renewal Example (Illustrative)

Illustrative example, not a real client. A hypothetical household holds a five-year fixed mortgage of $380,000 taken out in 2018 at 3.19% (illustrative, not a quote. OAC. Rates subject to change. Conditions apply.), on a 25-year amortization, with a monthly payment of about $1,830. Five years of payments bring the balance down to roughly $326,000 by the 2023 renewal date, with 20 years left on the amortization. Renewing into a five-year fixed rate of 5.34% (illustrative, not a quote. OAC. Rates subject to change. Conditions apply.) raises the payment to about $2,200, an increase of roughly $370 a month, or 20%. Shopping the renewal before the maturity date, rather than simply signing the lender's renewal letter, is how a borrower in this position finds out whether another lender would offer meaningfully better terms.

Heading into 2024: The Pivot Question, and What Actually Happened

The dominant question heading into 2024 was whether the Bank of Canada would begin cutting rates, and if so, when. Some expected cuts during 2024, but the Bank had not committed to a timeline.

• If inflation cooperated: cuts could begin as early as the first half of 2024, providing relief to variable-rate borrowers and improving the renewal outlook for fixed-rate holders approaching maturity.
• If inflation stayed sticky: the Bank could hold at 5.00% well into 2024, extending the pain for borrowers and further suppressing sales volumes.
• The supply problem was not going away. Regardless of what rates did, Canada needed to build significantly more housing than it was building. Until supply caught up with demand, prices were likely to remain elevated relative to incomes in most Ontario markets.

At the time, our practical advice was the same it has always been: review your options early, lock in a rate hold if something attractive is available, and do not assume your bank's renewal offer is the best you can do. That advice held up well.

Update, added October 7, 2026. The Bank of Canada made its first cut on June 5, 2024, lowering the overnight rate by 25 basis points to 4.75%.12 It kept cutting through 2024 and into late 2025, reaching 2.25% on October 29, 2025. The Bank held it at 2.25% at the most recent announcement on September 2, 2026.14 CMHC's Fall 2024 report later quantified the renewal wave this article flagged as building: about 1.2 million fixed-rate mortgages coming up for renewal in 2025 and roughly 980,000 more in 2026, together around 2.2 million fixed-rate mortgages.13 The direction we expected in December 2023, lower rates easing the renewal shock over time, did play out, though the first cut did not come until June 2024.