Record Hotel Rates and Rate Stability: Is Now the Time to Lock in Capital?
By Elliot Higgins, CFA – Associate, and Daniel Lester – Analyst
Interest Rates Held Steady Amid Trade Uncertainty
On April 16, 2025, the Bank of Canada maintained its overnight policy rate at 2.75%, following seven consecutive rate cuts since mid-2024. Governor Tiff Macklem emphasized that the decision was driven by the heightened uncertainty stemming from recent U.S. protectionist trade measures, which have disrupted markets and elevated inflation expectations. Although inflation reached 2.3% in March, factors such as the removal of the consumer carbon tax and declining global oil prices are anticipated to reduce inflation figures.
The Bank of Canada outlined two potential scenarios going forward: one where tariffs are resolved, leading to near stable inflation near 2%, and another involving a prolonged global trade conflict resulting in a Canadian recession with inflation temporarily exceeding 3%.
During these volatile markets, Largo’s established relationships with life insurance companies offer a distinct advantage, notably by offering borrowers the option to lock their interest rate at application, mitigating the risks associated with fluctuating bond yields.
Diverging Political Climate
As Canada approaches the federal election on April 28, 2025, housing policy has emerged as a pivotal issue distinguishing the major parties. The Liberal Party, under Prime Minister Mark Carney, advocates a government-led approach to construct 3.9 million homes by 2031. This plan includes significant investments in affordable housing, incentives for municipalities to expedite construction, and the repurposing of federal lands for residential development. Conversely, the Conservative Party, led by Pierre Poilievre, advocates for a market-driven approach. Their platform emphasizes reducing regulatory barriers and incentivizing municipalities to increase housing supply by tying federal infrastructure funding to home-building targets. The Conservatives propose building one million homes over three years, focusing on leveraging private sector efficiencies to meet housing demands.
At Largo Capital, we are closely monitoring these policy developments to help clients navigate the shifting landscape and secure capital for projects positioned to benefit from renewed government focus on housing and infrastructure, following a decade of stagnant growth in Canada.
Canada Sets All-Time Hotel ADR Record
Canada’s hotel sector continues to benefit from strong post-pandemic travel demand, favorable currency exchange for international visitors, and increased group and business travel. In February, Canada recorded an all-time high average daily rate (ADR) of $186.28, per STR, up 5.5% year-over-year and outpacing inflation. Vancouver led major markets with an ADR of $206.45, followed by Toronto at $191.21. The hotel sector is seeing renewed lender interest, especially in urban and resort markets where RevPAR has exceeded pre-pandemic benchmarks.
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