The Bank of Canada just made its first interest rate move since March. As of today, September 17, the key overnight policy rate has been lowered by 25 basis points, from 2.75% to 2.5%, its lowest level in three years.
Here’s what that means for Canadians who are watching real estate markets and why this shift could matter more than it seems to home buyers and homeowners.
What did the Bank of Canada do on Sept. 17?
The Bank lowered its benchmark rate, citing signs of a weakening economy, a softening labour market, lower inflationary pressures, and concerns about external risks, such as trade and tariff instability.
Because the overnight rate influences many borrowing costs (including the prime rate), changes here tend to ripple through to mortgage rates, lines of credit, and other variable-rate debt. The prime rate serves as the baseline for variable-rate mortgages and is increased or decreased in increments that match the Bank of Canada’s policy changes.
Screenshot from the Bank of Canada.
How homeowners benefit from a lower interest rate
One of the most immediate effects of a rate cut is for homeowners whose mortgages are variable, or whose payments adjust with the prime rate. The 2024 Canada Mortgage and Housing Corporation Mortgage Consumer Survey states about 23% of Canadian mortgage holders have a variable rate, while 69% opted for a fixed rate.
That means the September cut should translate into some instant savings for about one in every four Canadian mortgage holders.
What this means for people entering the housing market
Even though fixed rates aren’t directly tied to every move of the Bank’s policy rate, they are influenced by bond yields, market expectations, and overall borrowing costs. When the key rate falls, fixed rates tend to drift downward (or at least stabilize), especially if markets believe this is part of a broader easing cycle.
This means some home buyers who were previously priced out because of high interest costs may now qualify for the home they want. Lower interest payments mean a given income can support a somewhat larger mortgage.
Recent data from mortgage-rate aggregators show typical five-year fixed rates in many parts of Canada are now in the 3.7% to 4.5% range, and variable offers are close behind.
The outlook ahead: what CREA’s data says
The outlook for fall 2025 remains cautiously optimistic. The Canadian Real Estate Association’s (CREA) recent housing market report assumes that pent-up demand, combined with lower borrowing costs and a surge in listings could lead to a rebound in market activity across Canada. August proved to be the fifth straight month of increased home sales and new listings are up 8.8% compared to this time last year.
CREA Senior Economist Shaun Cathcart said if you’re a first-time home buyer this could be a sweet spot to time your purchase.
“I think we’re going to see a lot of (buyers) start to show up and start to pick these listings off any day now,” he said during the latest Housing Market Report.
Are further interest rate cuts likely to come?
Many economists had been betting on more rate easing later in 2025, depending on inflation behavior, economic output, and global uncertainty. With its move to 2.5%, the Bank has room, but will likely be cautious. Markets will be watching upcoming inflation reports, employment data, and international developments.
Why you should use a REALTOR® now
Your REALTOR® is your personal real estate MVP. While you’re figuring out financing, they can already get to work behind the scenes.
If you’re buying, this means setting up searches for you, attending open houses on your behalf, and asking around to their connections about what might be coming available.
If you’re selling, your REALTOR® can get to work marketing your property right away, getting it ready for staging and compiling documentation, all without severely disrupting your routines.
By now you know interest rates impact the Canadian real estate landscape and that likely isn’t about to change any time soon. Making the right decision at the right moment seems like a lot of pressure when you don’t know where interest rates will be on a month-to-month basis.
Thankfully REALTORS® monitor market trends and housing data to make sure, whether you’re buying or selling, your best interests are kept top of mind.
Don’t put it off any longer.
Source: https://www.realtor.ca/blog/what-the-bank-of-canadas-rate-cut-means-for-housing-markets/39555/1362