Fitch slashes Canada's home price forecast amid economic strain

Fitch Ratings has sharply downgraded its outlook for Canada’s housing market, citing a weakening economic environment and expectations for a softer job market.

In its mid-year global housing market update, the ratings agency cut its Canadian home price growth forecast to just 0% to 3% for 2025, a significant drop from the previously projected 7% to 10%.

“Rising unemployment and prospective buyer caution compound the effect of low affordability on demand,” Fitch said in its latest report.

The agency’s revised outlook comes as approximately 60% of Canadian mortgages set to renew this year will do so at higher interest rates, further intensifying affordability concerns among homeowners and prospective buyers.

Despite a more pessimistic view on home prices, Fitch does not expect a spike in mortgage delinquencies.

“Delinquencies should remain stable, supported by wage growth and borrower home equity,” the agency noted. This resilience is attributed to continued wage increases and the strong equity position of many Canadian mortgage holders.

Canada’s downgrade was the most severe among the countries reviewed in Fitch’s assessment. The agency also revised its home price forecasts downward for the US, Mexico, and the Netherlands, reflecting broader global economic headwinds. However, Fitch maintains that the global housing market will see “broad home price growth and low arrears for the second half of 2025.”

“Housing supply constraints are driving price growth, and stable-to-declining mortgage rates are helping sustain demand despite slowing global economic growth,” Fitch said.

Still, the agency warned that “downside risks persist” as higher tariffs and trade disruptions weigh on the global outlook.

“Concerns about deteriorating macroeconomic conditions may keep potential homebuyers on the sidelines. This hesitation could weigh on home prices,” Fitch said.

Source: Canadian Mortgage Professional