Why Inflation Is Cooling but Homeownership Still Feels Expensive in Canada
If you have been watching the news, you have likely heard that inflation in Canada is coming down. That sounds like good news, especially for homeowners and buyers who have been under pressure from higher mortgage rates and rising costs. Yet for many Canadians, owning a home still feels just as expensive as ever.
So what is really going on?
The answer lies in how inflation is measured, especially when it comes to housing. While overall inflation may be easing, the costs tied directly to homeownership, such as mortgage interest, property taxes, insurance, and maintenance, are still elevated. Understanding this disconnect is critical if you are buying, renewing, refinancing, or simply trying to manage your household budget.
What “Cooling Inflation” Actually Means for Canadians
Inflation is typically measured using the Consumer Price Index, or CPI. This index tracks how prices change over time across a broad basket of goods and services, including food, transportation, clothing, and housing-related costs.
When headlines say inflation is cooling, they are referring to the overall CPI number. This does not mean every category is getting cheaper. Some categories slow down faster than others, and housing is one of the slowest to adjust.
This is why many homeowners feel confused. Gas prices may stabilize, grocery inflation may soften, but monthly housing costs can remain high or even continue rising.
Shelter Costs Are the Missing Piece Most Homeowners Overlook
Within CPI, there is a category called shelter inflation. This includes several housing-related components that directly affect homeowners and buyers.
- Mortgage interest costs
- Rent
- Property taxes and utilities
- Home insurance and maintenance
Mortgage interest costs deserve special attention. Even when inflation starts to ease, mortgage interest costs can remain high because they reflect past rate increases. In other words, homeowners renewing today are still feeling the impact of earlier Bank of Canada rate hikes.
This is one of the main reasons affordability still feels stretched, even when inflation headlines sound more optimistic.
Why Mortgage Rates Do Not Move in Lockstep With Inflation
Many homeowners assume that if inflation drops, mortgage rates will immediately follow. In reality, mortgage rates respond to a combination of factors.
Variable rates are tied more directly to the Bank of Canada’s policy rate. Fixed rates, on the other hand, are influenced by bond markets and investor expectations about future inflation and economic growth. This means inflation can cool while fixed mortgage rates remain elevated, especially if markets expect inflation to be stubborn or economic conditions to remain uncertain.
What This Means If You Are Buying a Home
For buyers, cooling inflation does offer some long-term optimism, but it does not automatically restore affordability overnight. Home prices, borrowing costs, and qualification rules still play a major role. Even with inflation easing, buyers may still face stress test challenges and higher monthly payments compared to a few years ago.
How Renewing Homeowners Are Affected Most
Many Canadians renewing now are moving from historically low rates into much higher ones. Even if inflation is cooling, the renewal payment shock can be significant. If your renewal is coming up, reviewing your strategy early can help reduce risk and avoid unnecessary cost increases.
Cooling inflation is a positive signal, but it does not remove the need for careful planning. The households that navigate this period best are the ones that stay informed and proactive.
By Jason Woods
