September 18, 2025 | Buying

On September 17, 2025, the Bank of Canada made a notable move — lowering its key policy (overnight) interest rate by 25 basis points to 2.50%, its lowest in about three years. This is the first rate cut in six months, and the decision was unanimous among the Governing Council.

Here’s a breakdown of why they made this decision — and what it means for you, whether you’re buying, selling, or planning a move.

Why the Bank Cut Rates

Several economic pressures pushed the Bank toward easing:

  • Weak job market: More than 100,000 jobs have been lost in recent months, with unemployment rising to its highest in nine years (excluding the COVID-peak years).
  • Economic contraction: Canada’s GDP shrank by about 1.6% in the second quarter, and the outlook for the third quarter isn’t strong.
  • Lower inflation pressures: While inflation remains something to monitor, underlying inflation has eased. Core inflation is hovering near the upper end of the Bank’s target band.
  • Trade and external risks: Ongoing trade uncertainty — including U.S. tariffs and related disruptions — continues to weigh on the economy.

This move reflects the Bank’s attempt to balance risks: curbing inflation while supporting growth.

What This Means for the Housing Market

For home buyers: Lower interest rates typically mean cheaper borrowing. If you’re securing a mortgage soon, you may benefit from slightly lower rates on fixed or variable mortgages. This improves affordability and can increase your buying power. With lower rates, the same monthly payment can get you a larger home, or help you purchase more comfortably without stretching your finances. If you’re renewing or refinancing, this may be a good time to explore better options.

For home sellers: Lower rates often encourage more buyers to enter the market, increasing demand and potentially leading to faster sales or multiple-offer situations in desirable neighbourhoods. Increased buyer activity could also put upward pressure on prices. However, if local job markets remain weak, some buyers may still be cautious. For many sellers, this could be a good moment to list, especially before any further rate changes.

For investors: Cheaper borrowing costs are an advantage, but they must be weighed against broader economic risks. Properties in high-growth areas or strong rental markets are more likely to perform well than those in slower regions.

What to Watch Going Forward

While this rate cut provides relief, it doesn’t solve every economic challenge. Here are a few key things to keep an eye on:

  • Future rate announcements: The Bank has left the door open for another cut if the economic data doesn’t improve.
  • Job market trends: Rising unemployment could reduce consumer confidence, even with lower borrowing costs.
  • Inflation path: If inflation rises again, the Bank may be forced to reverse course.
  • Local housing conditions: Supply, employment opportunities, schools, and neighbourhood amenities will still play a major role in how prices move.

What This Means for Our Clients

  1. Buyers: Now may be a strong time to get pre-approved or lock in a mortgage. Lower rates make your budget stretch further.
  2. Sellers: Well-presented homes in good locations may attract more interest, but remember that local conditions still matter.
  3. Investors: This could be a good opportunity to expand, but weigh it carefully against broader economic uncertainty.
  4. First-time buyers: Lower rates are especially helpful, but don’t forget to budget for all expenses — property taxes, insurance, and maintenance included.

Bottom Line

This rate cut signals that the Bank of Canada is concerned about slowing growth and the labour market. For real estate, it creates a softer borrowing environment, which tends to favour buyers, but it can also stimulate market activity for sellers.

If you’re considering buying or selling in the near future, this could be the right time to start preparing. Want to know what this means for the local market — and how mortgage payments might shift in our area? Reach out, and we’ll walk through the numbers together.