The Bank of Canada (BoC) has lowered its overnight rate by 25 basis points, marking the sixth consecutive rate cut. This brings the rate down to 3%, as the central bank moves to support economic growth. Along with this decision, the BoC has announced an end to quantitative tightening and plans to moderately increase asset purchases in line with economic expansion.
Key Takeaways From the Announcement:
Inflation has remained steady at 2% since the summer.
Lower interest rates are stimulating big-ticket purchases, such as homes and vehicles.
Canada’s GDP grew 1.3% in 2024 and is forecast to grow1.8% in 2025-2026, slower than previously expected due to reduced immigration.
GDP per capita is improving due to rising incomes and lower interest rates, but overall GDP growth is sluggish partially due to decreased immigration.
Uncertainty looms over a potential U.S. trade war, with tariffs from a Donald Trump-led administration threatening to push up prices on imported goods, which could fuel inflation.
The BoC acknowledges that monetary policy cannot counteract the effects of tariffs, making the trade situation a significant wildcard for Canada’s economy.
How This Affects the Toronto Housing Market
Lower interest rates make borrowing cheaper, which directly benefits homebuyers in Toronto. Mortgage rates have already been declining, making homeownership more accessible and increasing buyer demand.
1. More Buyers Entering the Market
With rates falling, more first-time buyers and investors are jumping in…. but slowly. Toronto real estate has been sluggish in recent months, but we’re seeing some signs of renewed activity. Listings are up considerably. Expect high quality houses in good neighbourhoods like the Annex, Seaton Village, and midtown Toronto to get solid sales prices, while many condos and lesser quality places may stagnate on the market.
2. Home Prices Could See Moderate Growth
While Toronto home prices have been relatively flat, this reduction in rates along with the changes in lending rules should draw more people into the market which theoretically should increase demand which could push prices up modestly. That said the supply side remains relatively high which could help to stifle prices in the market. All of this would make sense in a normal economy, but there is uncertainty in the market at the moment. With the looming threat of massive tariffs from Trump, people are truly unsure about how the economy will be over the next number of months.
3. Real Estate Window of Opportunity
Lower borrowing costs make properties more attractive. If you’ve been considering buying a house or even an investment property, this may be a prime opportunity before rates potentially level out later this year and while prices are still relatively low. It is also potentially a good time as many wait to see what will happen with the Trump tariff situation. Many people will likely hold back on making any big decisions while the threat of large changes to the economy hangs overhead, which is completely reasonable. The coming months will of course tell the tale. Like with any big purchase, there is always a risk, but housing is, and always has been, about far more than the economic investment. It is primarily a place to hang your hat, to be part of a community, to raise your kids and to simply enjoy your house and turn it into a home where you invite friends and family to enjoy shared time together..
Final Thoughts
Overall, for Toronto buyers, sellers, and investors, this rate cut is a positive development, making real estate transactions more affordable and attractive. However, with external uncertainties like trade policy and inflation risks, it’s important to stay informed and make strategic decisions and also to consider the real purpose of a home and whether or not your current situation meets your needs. Please be in touch with me if you have any questions.
Wayne Bibby is a Seaton Village Resident and Realtor.
416 997 4285