Easing rates may spark fresh activity in housing while giving businesses room to breathe.
Today, the Bank of Canada announced a 25 basis-point cut in its overnight policy rate, lowering it from 2.75 % to 2.50 % — the first rate reduction since March.
Why the Cut?
- Real GDP contracted about 1.5-1.6 % in Q2, largely driven by trade, export weakness, and business investment declines.
- The labour market has softened: recent job losses, slower hiring, and unemployment around 7.1 %.
- Inflation is cooling, especially core measures, and upward momentum has dissipated.
What This Means for Businesses
- Lower borrowing costs will ease pressure on variable-rate debt; companies with floating-rate loans may see some relief.
- Given economic uncertainty, many businesses will likely stay cautious—delaying large capital outlays or expansions in favour of conserving cash.
- Markets are now watching for further easing: there’s a possibility of additional cuts depending on inflation, employment, and global trade developments.
What This May Mean for the Real Estate Market
- Mortgage rates & financing costs: The rate cut should put downward pressure on variable mortgage rates and also help somewhat in lowering rates in fixed mortgages over time. For homeowners renewing variable-rate mortgages, or those just entering the market, this is a boost.
- Buyer activity: The reduction may bring more buyers off the sidelines—especially those who were previously priced out or waiting for better borrowing conditions. With somewhat improved affordability (thanks to lower rates), there may be more demand.
- Variation & housing type effects: More expensive segments of the market may see slower recovery in price growth due to persisting affordability issues. Condo markets might benefit sooner, as they tend to have lower entry cost.
- Inventory & prices: Increased sales may gradually reduce high inventory. However, prices are unlikely to rebound sharply soon, especially in areas where affordability constraints are high. Some downward pressure or flatlining may persist.
- Longer-term outlook: If economic conditions (employment, wage growth) improve and inflation remains under control, the real estate market could see a more sustained recovery in 2025-2026. But that’s conditional on maintaining stability in rates and improving economic confidence.
Looking Ahead
- The Bank of Canada meets again on October 29, 2025, when it will release its next policy interest rate decision and an updated Monetary Policy Report.
- Key indicators to watch include: employment trends, especially in trade-sensitive sectors; inflation momentum (both headline and core); consumer and business confidence; and external trade pressures.
- For real estate the BoC will keep an eye on mortgage rate spreads (fixed vs variable), inventory levels in high-demand vs slower regions, and affordability indices (how home-ownership costs relate to incomes).
Making the Most of Today’s News
With rates shifting, the market landscape is evolving quickly. Whether you’re considering buying or selling, now may be the time to reassess your strategy.
Our team can help you understand how today’s cut impacts your options — and position you to maximize your next move.
Sources For Further Reading:
Bank of Canada. (2025, September 17). Bank of Canada lowers policy rate to 2½% [Press release]. Bank of Canada. Bank of Canada
Reuters. (2025, September 17). Bank of Canada cuts rates to three-year low, cites risks to economy. Reuters
Reuters. (2025, September 17). Bank of Canada cuts rates to 2.5%, says ready to cut again if risks rise. Reuters
Reuters. (2025, September 17). Bank of Canada head says rate cut designed to help balance risks to economy. Reuters
RSM US LLP. Brusuelas, J. (2025, September 17). Bank of Canada cuts interest rate to 2.5% amid economic, labour challenges. The Real Economy. The Real Economy Blog
RBC Economics. (2025, August). Canada’s housing market forecast update. Royal Bank of Canada. RBC
TD Economics. (2025, July). Is Canada’s housing market heating up? TD Stories. TD Stories
Canadian Mortgage Professional. McAlinden, F. (2025, September 17). Bank of Canada announces new rate cut. Mortgage Professional America
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