How Bank of Canada Rate Cuts & U.S. Tariffs in 2025 Will Impact the Real Estate Market

Recent reports from BMO, RBC, and the Bank of Canada (BoC) suggest that the BoC will cut interest rates faster and deeper than previously expected due to the economic slowdown caused by new U.S. tariffs on Canadian imports.

What’s Happening with Interest Rates?

  • BMO Forecast: The BoC is expected to cut rates by 0.25% at each of its next four meetings, bringing the overnight rate down to 2.0% by July 2025 to counteract economic uncertainty and slow growth. (BMO Economics)
  • RBC View: RBC economists suggest that the BoC may cut rates even more aggressively if U.S. tariffs remain in place, as slowing exports and rising business costs could push Canada closer to a mild recession. (BNN Bloomberg)
  • Bank of Canada’s Position: The next BoC rate announcement is scheduled for March 12, and policymakers are expected to lower rates to support economic growth, even if inflation remains slightly above target. (Bank of Canada)
  • Inflation vs. Growth: While tariffs increase prices, the slowing economy means inflation won’t spiral out of control. The BoC will likely prioritize economic growth over inflation concerns—leading to rate cuts. (RBC Forward Guidance)

What This Means for the Real Estate Market

1. Mortgage Rates Will Start Dropping—But Slowly

Lower BoC rates mean banks will gradually lower mortgage rates, but don’t expect an overnight change. Fixed mortgage rates depend on bond yields, which adjust based on market expectations. Variable rates will drop more directly, but buyers should still shop around for the best deals.

2. Buyer Demand Will Increase—But It Won’t Be a Frenzy

More affordable mortgages will bring back buyers who were priced out, but this won’t be another 2021-style rush. Affordability is still a challenge, and economic uncertainty could keep some buyers on the sidelines. Expect a slow but steady rise in market activity instead of a dramatic boom.

3. Home Prices May Stabilize—But Not Skyrocket

Lower rates help home values hold steady, but they don’t automatically drive prices up. Sellers who overprice their homes will still struggle, and bidding wars won’t return in most markets. Proper pricing and market strategy will remain key for sellers.

4. First-Time Buyers & Investors Will Benefit the Most

✔️ First-time buyers will have lower borrowing costs, making homeownership more attainable.
✔️ Investors could return to the market, as cheaper financing makes rental properties more attractive.

5. The Economy Still Matters

Rate cuts can boost confidence, but they can’t fix everything. If job losses increase or economic uncertainty worsens, buyers may still hesitate. Smart homebuyers will weigh affordability against overall economic stability before making a move.

Final Take: A Market Shift, Not a Market Boom

✔️ More buyers will enter the market, but affordability is still a challenge.
✔️ Sellers will benefit from increased demand, but overpricing won’t work.
✔️ Investors may jump back in, especially in rental-friendly markets.
✔️ The economy still plays a major role—rate cuts help, but they don’t guarantee a hot market.

Thinking of Buying or Selling? Let’s Talk.

With the market shifting, having a strong strategy is key. If you’re considering buying, selling, or investing in 2025, now is the time to plan ahead. Let’s chat about how to navigate this evolving market and make the best move for your goals. 🚀