UPDATED: For the third time in a row, the Bank of Canada (BoC) held the overnight interest rate at 2.75 per cent, a sign of economic stability for prospective homebuyers that may also disappoint developers and the construction sector.

Though U.S. tariffs on Canadian imports have disrupted trade, Canada’s economy showed “robust growth” in Q1, Tiff Macklem, the Bank of Canada’s governor, said in a release. But Canada’s GDP likely fell around 1.5 per cent in Q2, with business growth and household spending also held back by economic uncertainty.

“With still high uncertainty, the Canadian economy showing some resilience, and ongoing pressures on underlying inflation, Governing Council decided to hold the policy interest rate unchanged,” Macklem said.

If a weakening Canadian economy puts further downward pressure on inflation and the upward price pressures from trade disruption are contained, “there may be a need for a reduction in the policy interest rate,” he said in a press conference. 

For those looking to buy homes, the announcement "gives an indication of stability," Anne-Elise Cugliari Allegritti, the director of research and communications at Royal LePage Canada, said in an interview with RENX Homes.

Conversely, developers may be left wishing for more, as the cost of borrowing did not fall, making it more expensive to start housing projects. 

Indicative of economic stability

Cugliari Allegritti said most Canadians are not expecting lending rates to come down significantly at this period, and even a 25 basis point trim was not going to move many sidelined homebuyers.

A broader worry about the economy is a bigger factor in slowing down activity, she said. But with factors such as national-level employment being resilient, the interest rate hold, if anything, "will give those buyers the confidence to sort of move forward with their plans, because it shows that there is some stability in the market."

An early sign that homebuyers are more confident is increased activity in Ontario and the lower mainland of British Columbia, she added. If this continues, a more "normal-looking fall market" may materialize.

Unlike Cugliari Allegritti, Leor Margulies, a partner and lawyer at the commercial real estate and development group of Toronto-based firm Robins Appleby, was less positive.

In an emailed statement, he called the Bank of Canada’s decision to leave the interest rate unchanged an “exceptionally conservative approach” that “totally ignores the impact of job losses and uncertainty due to tariffs and the looming recession in the construction industry that will come with no new sales.”

The central bank’s “timid approach” to reducing interest rates will only add to new home purchasers' reluctance to step into the marketplace, he said. Margulies cited high home prices, economic unpredictability, and the lack of major relief being offered from all levels of government to reduce taxes on new homes as reasons.

The Bank of Canada is scheduled to announce its next decision for the overnight rate target on Sept. 17.

EDITOR'S NOTE: RENX Homes will update the story as it develops.