Inflation is cooling. The stress test is staying. And Toronto’s housing market just hit a split we haven’t seen in years. Here are three developments affecting homeowners and buyers in the Greater Toronto Area this week.
Inflation Is Cooling, But Don’t Expect a Rate Cut Yet
Canada’s core inflation measures dropped to 2.4% and 2.5% this week, right near the Bank of Canada’s 2% target. Strip out the noise from last year’s temporary GST/HST holiday and inflation is running at about 1.2% annualized over the last three months.
Despite the encouraging numbers, markets still expect the Bank of Canada to hold rates steady at the next announcement on March 18th.
Meanwhile, the 5-year government bond yield is sitting at 2.68% as of this morning, down from around 2.85% in late January. Bond yields have a direct influence on fixed mortgage rates, so if this downward trend continues, we could see fixed rates ease slightly in the coming weeks.
What this means for you: If you’re on a variable rate, you’re likely in a holding pattern until the Bank of Canada makes a move. If you’re considering a fixed rate, the bond market is trending in your favour. It’s worth keeping an eye on.
The Stress Test Is Here to Stay
OSFI is the Office of the Superintendent of Financial Institutions. They’re the federal regulator that oversees banks and sets the rules for mortgage lending in Canada.
This week, OSFI’s superintendent confirmed that federally regulated lenders have not asked to weaken or remove the mortgage stress test. The stress test requires you to qualify for a mortgage at roughly 2% above your actual mortgage rate. So if your rate is 4.5%, you need to prove you can handle payments at around 6.5%.
In fact, lenders support keeping it in place because it stabilizes lending standards and reduces risky competition between lenders.
What this means for you: If you’ve been waiting for the stress test to disappear, stop waiting. It’s not going anywhere. Plan around it. And if you’re finding it difficult to qualify at a bank because of the stress test, that doesn’t mean you’re out of options. Working with a mortgage agent who has access to many lenders and knows about different ways to position your file can make a real difference. There are programs and products outside the big banks that most people never hear about.
Toronto’s Market Split Is the Sharpest in Years
Canada’s housing market had a slow start to 2026, but the national numbers are hiding a much bigger story at the local level.
Toronto is combining weaker prices with rising supply. Analysts are forecasting further, if modest, price declines through the rest of the year. Population shifts and a flood of new condo completions are weighing on demand. Condo starts have dropped from a peak of nearly 34,000 in August 2023 to just over 10,000 by December 2025. Investors are stepping back, and construction is pulling back with them.
But there’s another side to this story. For buyers, especially first-time buyers, this is the most favourable supply and demand balance we’ve seen in years. Less competition, more inventory, and sellers who are willing to negotiate.
What this means for you: If you’re buying a home to live in for the next 10 to 15 years, the current conditions work in your favour. More choices, less pressure, and room to negotiate. If you’re an investor looking at Toronto condos, the math still doesn’t work for most scenarios right now. Know the difference and plan accordingly.
The Bottom Line
Inflation is trending in the right direction but rates are likely holding for now. The stress test is permanent, so plan around it rather than hoping it goes away. And Toronto’s market is offering real opportunity for buyers while remaining challenging for investors.
Whether you’re renewing, buying, or just want to understand where you stand, I’m happy to talk it through. No cost. No pressure. Just clarity.
Want to discuss your specific situation?
Whether you’re renewing, buying, or just want to understand where you stand, I’m happy to talk it through. No cost. No pressure. Just clarity.