Don't expect a Canada housing market surge even if the BoC cuts rates

The Bank of Canada’s anticipated interest rate cut on Wednesday may provide some financial relief, but industry experts warn that it is unlikely to significantly boost Canada’s housing market amid ongoing uncertainty surrounding US tariffs.

A 25-basis-point reduction would bring the central bank’s key rate down to 2.75%, a decline from the post-pandemic peak of 5%. While this could make loans more attractive for potential homebuyers, many may still hesitate due to economic uncertainty, Ron Butler, a mortgage broker at Butler Mortgage, explained in an interview with Yahoo Finance Canada.

“There’s a level of uncertainty here I haven’t seen since the beginning of COVID or the 2008 financial crisis,” Butler said. “Prices have to become bargain basement to overcome that kind of uncertainty.”

Tariff uncertainty stalls market activity

January data from the Canadian Real Estate Association (CREA) pointed to decreased sales and increased inventory, trends that analysts attribute to uncertainty caused by new US tariffs. A report from TD Economics noted that the Toronto and Vancouver markets have remained subdued in early 2025, with buyer and seller hesitation holding prices steady.

According to Kingsley Ma, area vice-president at RE/MAX Canada, the tariff situation “really changes the whole landscape because now everyone’s pausing.” He noted that “until it settles, it looks like activity-wise it’s going to be probably lesser than we all expected.”

While some buyers may see the rate cut as an opportunity to enter the market, Ma told Yahoo that the effect will be limited, primarily benefiting the lower-end housing segment such as condominiums and entry-level homes.

Impact on homebuyers and mortgage holders

A more aggressive cut of 50 basis points could stimulate the market, according to Butler.

“Not everybody sees 50 [basis points] and realizes that’s a version of panic and thinks ‘I better back off,’” he said. “Not everybody feels that way.”

Many potential buyers are expected to continue waiting, particularly if they anticipate further economic challenges. “If you’re a buyer and you think there’s going to be a significant economic disturbance next year, I don’t think you’d buy today,” Butler added.

For existing homeowners, the rate cut offers some relief, particularly for those with variable-rate mortgages. According to Butler, a 25-basis-point reduction equates to roughly $15 in monthly savings per $100,000 borrowed, meaning a homeowner with a $600,000 mortgage could see savings of around $90 per month.

Fixed-rate mortgages, which are influenced by bond markets rather than the Bank of Canada rate, may be near their lowest point, with some posted rates just under 4%. However, Butler emphasized that bond traders remain cautious about inflation risks, making it unlikely for fixed rates to change significantly.

Source CMP
By Jonalyn Cueto