![\"\"](\"https:\/\/www.livabl.com\/articles\/wp-content\/uploads\/2017\/09\/bank-of-canada.jpg\")
<\/a><\/p>\nPhoto: James Bombales<\/em><\/p>\n Canadian home sales took a slight dip in September, following a summer of gradual sales growth. So what happened? According to one economist, the rising interest rate environment will keep the market in check for the foreseeable future.<\/p>\n \u201cLooking at the past few months, sales posted relatively solid gains in June and July, driven by a rush of pent-up demand as markets adjusted to [a new mortgage stress test introduced in January],\u201d writes Rishi Sondhi, an economist with TD, in a recent note. \u201cHowever, activity has eased considerably since then.\u201d<\/p>\n\n Sondhi calls September\u2019s sales decline a \u201csetback on the road to recovery\u201d for the Canadian market, and says that activity will continue to slowly warm over the final quarter of the year.<\/p>\n Interest rates have been on the rise for months, with the Bank of Canada hiking the overnight rate to 1.50 percent in July. Another hike is likely on its way for October, which Sondhi says should keep sales and prices at relatively modest levels.<\/p>\n \u201cThis is consistent with our forecast calling for resale activity to rise at a more moderate pace…as increasing borrowing costs and stretched affordability conditions in key markets keep a lid on demand,\u201d he writes.<\/p>\n One market that is struggling more than others? BC, which is dealing with a recent increase to the foreign buyers tax, on top of new mortgage regulations and higher interest rates.<\/p>\n