The Bank of Canada’s decision in July to hold its key interest rate at 2.75% may not have come as a huge surprise to economists, but for Canadian homeowners and aspiring home buyers, the decision may have been a bit of a disappointment, especially for owners facing mortgage renewals at much higher rates than they’ve been used to.
“It seems that uncertainty still prevails in our economy, which is estimated by the Bank of Canada to have contracted by 1.5% in the second quarter,” explains Chris Jokel, Senior Data Engineer at the Canadian Real Estate Association (CREA).
He points to how industries and geographical regions impacted by the threat of tariffs are exhibiting weaker labour markets.
The chances of two rate cuts by the end of 2025 have diminished, especially since Bank of Canada Governor Tiff Macklem declined to forecast following a reporter’s question last month about future cuts. While core inflation hovers near the Bank’s 2% target, underlying pressures, such as more tariff threats from the U.S. administration, remain.
“We’re going to take this one decision at a time,” Macklem said, adding, “we’re continuing to put more weight on the risks, and we’re ready to respond to new information.”
Let’s get into what this means when it comes to housing in Canada.
For homeowners renewing mortgages
There’s no further relief in sight. While the Bank of Canada’s key interest rate (which directly impacts those with variable mortgages) has dropped to 2.75% from its peak of 5% during the spring of 2024, it’s a far cry from those early days of the pandemic when the overnight lending rate was 0.5%.
Since variable and adjustable‑rate plans track the prime rate, any hold in the policy rate means no further cuts (or hikes) to your payment instalment. So, for now, you’re locked into today’s prime rate of 4.95% until things change.
For aspiring home buyers looking to buy in 2025
You could see your purchasing power drop.
Considering you still must qualify for your mortgage at a higher rate, you may need to temper expectations. That’s why it’s important to know how much you can get approved for.
“Those looking to buy a home in areas most affected by tariffs will likely hold off until better economic news starts coming in,” Jokel says, mentioning regions where cross-border industries are major economic drivers, such as municipalities like Windsor, Ontario.
The good news is that home prices seem to be stabilizing in major markets across Canada, but again, it all depends on where you’re looking.
Prices are coming down in places like Toronto and Vancouver (especially with condos), but in other markets such as the Prairies, Quebec, and the East Coast, prices are rising.
When prices come down, markets tend to heat up — it’s a delicate balance and buying or selling a home is filled with nuance.
Which brings us to our final point.
Why working with a REALTOR® is important in 2025
Your REALTOR® is your personal real estate MVP. While you’re figuring out financing, they can already get to work behind the scenes. If you’re buying, this means setting up searches for you, attending open houses on your behalf, and asking around to their connections about what might be coming available.
If you’re selling, your REALTOR® can get to work marketing your property right away, getting it ready for staging and compiling documentation, all without severely disrupting your routines.
By now you know interest rates impact the Canadian real estate landscape and that likely isn’t about to change any time soon. Making the right decision at the right moment seems like a lot of pressure when you don’t know where interest rates will be on a month-to-month basis.
Thankfully REALTORS® monitor market trends and housing data to make sure, whether you’re buying or selling, your best interests are kept top of mind.
Don’t put it off any longer. Find your professional REALTOR® today!
Key takeaways
• Plan for higher payments when renewing your mortgage (build extra room into your budget now).
• Boost that down payment to offset tougher qualifying rates.
• Stay nimble: regional market cool‑offs could create buying opportunities.
• Keep an eye on data: inflation, jobs and trade updates will set the Bank of Canada’s next move.
— REALTOR.ca