Canadian Mortgage Borrowing Weakens as Central Bank Considers Tightening, BMO Says

06:47 AM EDT, 10/21/2026 (MT Newswires) -- Canadian mortgage borrowing weakened further in August, signalling a slowdown in the economy's most rate-sensitive sector as the Bank of Canada weighs a potential rate hike, according to BMO Capital Markets in a note. Household mortgage debt increased by just 3.8% annually, marking the slowest growth since the 2023-24 housing correction and, before that, the early 2000s, wrote BMO in a Tuesday note. Although the national housing market is showing signs of stabilization, ongoing weakness in Ontario and British Columbia, coupled with subdued activity in segments such as newly built condominiums, continues to dampen the recovery in mortgage demand, said the bank. The slowdown adds to the BoC's policy challenge ahead of a possible rate hike at next Wednesday's policy meeting, said BMO. With variable-rate mortgages representing about 30% of new mortgages in the second quarter, according to the BoC, further tightening could raise borrowing costs for households and exacerbate pressures in an already sluggish housing market, added the bank.