After months of waiting, Canadian homebuyers finally have good news: the Bank of Canada (BoC) has resumed its rate-cutting cycle, trimming the overnight rate to 2.5% in September 2025, the lowest level since mid-2022. This signals a turning point for the real estate market and a potential window of opportunity for both first-time and move-up buyers.​

---

Where Rates Are Headed Next

Economists expect two more rate cuts before mid-2026, bringing the policy rate closer to 2–2.25%, considered the BoC’s “neutral” range. Reuters and RBC projections show inflation remaining below the 2% target through late 2025, allowing more flexibility for continued easing.​

In fact, as core inflation hovers at 2.6% and GDP growth slows to 1.2%, analysts believe further rate reductions are more likely than hikes. This economic cooling, combined with trade pressure from new U.S. tariffs, gives the BoC reason to stimulate borrowing and spending through cheaper credit.​

What This Means for Homebuyers

1. Lower Borrowing Costs Are Easing Pressure

The rate drop from 2.75% to 2.5% translates into lower variable mortgage rates and HELOCs, with lenders already adjusting their prime rates accordingly. For a typical $650,000 mortgage, this could mean savings of about $80–100 per month, or $1,000+ a year.​

2. Renewed Market Confidence

After a sluggish summer, early data from September show a modest rebound in home sales as confidence begins to return. Lower rates are drawing some buyers back who had been waiting on the sidelines during 2023–2024’s high-rate environment.​

3. Fixed vs. Variable Decisions

Fixed mortgage rates, which follow bond yields, are also trending downward as global markets price in a more stable economic outlook. The average five-year fixed is now around 3.9–4%. This narrowing gap between variable and fixed rates gives borrowers more flexibility in structuring their loans.​

Why You Should Still Plan Carefully

While declining rates open doors, many economists caution that affordability challenges remain. Canadian home prices in key markets like Toronto and Vancouver remain elevated, and even slight dips in rates may not fully offset high valuations or stricter lending criteria.

Moreover, falling rates can reignite competition. As demand rebounds, buyers may face bidding wars again in markets where supply remains constrained, meaning timing and mortgage structure will be key to maximizing savings.​

Smart Home-Buying Moves for 2025

1. Get Pre-Approved Early

Capture lower rates now and shield your budget from potential lender markups if demand spikes. A Cannect pre-approval can lock in your rate while still allowing flexibility if rates drop further.

2. Consider Short-Term Flexibility

If rates are expected to fall again in 2026, a 2- 3 year fixed or variable-rate mortgage could help you benefit from future reductions.

3. Budget Beyond the Rate

While interest rates are softening, closing costs, home insurance, and property taxes continue to climb. Base your affordability on total monthly outflows, not just your mortgage payment.

4. Use Cannect to Compare

The best deal isn’t always at the big banks. Cannect’s digital tools match homebuyers to competitive rates and custom terms that align with individual financial goals, saving clients thousands over a five-year term.

---

What to Expect Next

Market analysts foresee the BoC cutting its policy rate to around 2% by mid-2026, giving the housing market steady tailwinds but not the frenzy of pandemic-era borrowing. Homeownership will remain a calculated move, but one supported by improving affordability and easing financial pressures.​

For Canadians planning to buy in the next 6–12 months, now is the time to prepare: rates are moving in your favor, but markets will adjust quickly once pent-up demand returns.

Looking to take advantage of the next Bank of Canada rate cut?

Speak to a Cannect mortgage expert today to find out how today’s lower rates can strengthen your home-buying strategy before prices rise again.