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Economists are urging the Bank of Canada to reduce interest rates to invigorate the housing market, which has been hampered by high borrowing costs and a stagnation in home sales. A recent 50 basis point rate cut brought the benchmark rate to 3.25%, aiming to alleviate mortgage pressures and stimulate buyer interest. However, the central bank remains cautious, concerned that premature easing could reignite housing demand and exacerbate inflation, particularly in shelter costs, which have seen significant increases in rent and mortgage interest expenses.

Despite these rate cuts, analysts suggest that monetary policy alone may not resolve Canada's housing affordability issues. The Desjardins Economic Studies report indicates that while lower rates might offer some relief, they are unlikely to return affordability to pre-pandemic levels. Factors such as a structural shortage of housing supply and rising construction costs continue to pose challenges . Moreover, the Bank of Canada acknowledges that monetary policy cannot address these supply-side constraints, emphasizing the need for comprehensive strategies beyond interest rate adjustments .​

In response, the federal government has initiated programs like the Affordable Housing Fund and the Housing Accelerator Fund to increase housing supply and support affordable housing projects. However, the effectiveness of these initiatives depends on various factors, including municipal cooperation and the capacity of the construction industry. While rate cuts may provide temporary relief, long-term solutions require coordinated efforts to address the underlying issues in Canada's housing market.​

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