Too Tight? The Impact of Bank of Canada Tightening on BC Housing Markets


Later this year, the Bank of Canada is widely expected to embark on its first interest rate tightening cycle since 2018. BC Real Estate Corporation has come out with a Market Intelligence report to consider how high interest rates might rise and using both historical data and model simulations, it has analyzed how BC housing markets may be impacted.

The number of home sales in British Columbia is expected to fall and home price growth will moderate because of rising interest rates according to the report examining the potential impacts of the Bank of Canada’s rate tightening widely expected this year.

BCREA’s Market Intelligence report, Too Tight? The Impact of Bank of Canada Tightening on BC Housing Markets, was written by the association’s Chief Economist Brendon Ogmundson and explores both the historical impacts of the Bank raising its policy rate and a number of scenarios likely to play out in BC’s housing market as a result.

“In the past, Bank of Canada tightening has usually led to falling home sales and flattening home prices, so it wouldn’t be a surprise to see the same happening in the upcoming round of tightening” says Ogmundson. “Based on previous trends and our model simulations for what might be to come with respect to rates, we have outlined a number of likely scenarios in this report.”

The Bank of Canada has signaled that in response to elevated Canadian inflation, it will begin raising its policy rate or “tightening” monetary policy this year. The impact of this type of action on housing markets is generally predictable, however, with BC’s housing markets currently undersupplied with record-low numbers of active listings, the impact on prices may not be as significant.

“With markets so out of balance, we expect home price growth to slow but to what extent depends on the final rate destination for the Bank of Canada and for Canadian mortgage rates,” adds Ogmundson. “Our model simulations show only a minor impact on home prices in the first two years following the Bank raising its overnight rate.”

British Columbia set a new record for home sales last year with 124,854 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in 2021, a 32.8 per cent increase from the 94,001 units sold in 2020. For more economic analysis from the British Columbia Real Estate Association visit