07:04 AM EST, 11/26/2024 (MT Newswires) -- Now that Canada's resale housing market is starting to show signs of life, attention to housing-related inflation is turning to new home prices, said Bank of Montreal (BMO).

The bank noted it knows that mortgage interest costs have been -- and continue to be -- the largest source of upward pressure on

inflation but that is expected to slow as mortgages reset at falling rates.

Rent inflation hasn't been far behind, driven by historic population inflows -- a phenomenon that is expected to reverse in 2025, stated BMO.

In contrast, homeowners' replacement costs -- which are driven by new home prices -- have been a source of deflation over the last couple of years as elevated mortgage rates and strained affordability kept a lid on demand, pointed out the bank.

Now, prices in both new and resale markets could be turning a corner, it added.

Though pockets of softness remain in certain markets and segments, a broad recovery could partially offset some of

the progress in shelter costs but not yet enough to alarm the

Bank of Canada, but it's something it will be watching when determining the pace of future rate cuts, according to BMO.