The Bank of Canada ended its rate-cutting cycle today with its first rate hold of 2025, keeping the overnight lending rate at 2.75%. Unlike previous rate cut decisions, today’s outcome was less predictable given heightened trade risks, tariff policy uncertainty, and the upcoming federal election. The impact of this rate hold on the 2025 spring housing market could be minimal, but the current economic climate might provide ideal home-buying conditions for savvy buyers.
The last time the Bank of Canada’s overnight lending rate was lower than 2.75% was in September 2022. At that time, the Bank of Canada was just starting its rate hike cycle, and mortgage rates were rising, with the average 5-year fixed mortgage rate at 4.34%.
Conversely, today’s mortgage rates continue to fall. According to Ratehub.ca, the average 5-year fixed rate was at 3.84% in March, down from 3.99% in January. However, Penelope Graham, mortgage expert at Ratehub, suggests that further fixed rate decreases are less certain.
“Extreme market volatility has caused large swings in bond yields; while the Government of Canada five-year yield briefly touched a three-year low in the 2.4% range, that reversed mid-week when spooked investors turned their back on even traditionally safe-haven investments, causing a large sell-off,” says Graham. “While that activity has since stabilized, yields remain in the upper 2.7% range, which could put upward pressure on fixed mortgage rates.”
A recent Ipsos poll found that 73% of Canadians are delaying major purchases because of economic uncertainty. However, 59% still feel confident in their personal finances, suggesting that consumer activity could rebound if conditions improve.
The real estate market has had an extremely slow start to the year. Year-over-year national home sales declined in February and March, coinciding with the timing of tariff threats. In March, national home sales fell 9.3% year-over-year, marking one of the lowest March sales levels in recent years. Despite this, there is hope for a rebound.
“The most recent real estate data shows deep hesitation among home buyers, with sales dropping by double-digit percentages,” explains Graham. “However, with Mr. Trump rolling back his most recent tariff threats, market sentiment may stabilize. Combined with slightly lower mortgage rates, that could lead to a pickup in activity, should buyer confidence return. However, this all hinges on how the trade war situation evolves, and whether the Canadian economic picture remains healthy.”
While making a major financial decision in today’s unpredictable economy may seem unwise, buying a home when competition is low can be advantageous. According to the Canadian Real Estate Association’s (CREA) March 2025 report, the sales-to-new listings ratio sits at 45.9%, the lowest since February 2009. While 40% to 60% indicates a balanced market, this figure suggests buyer-friendly conditions, especially in regions where inventory is outpacing sales.
Home prices are typically driven up by increased competition in the spring, but as demand is softening this year, so are home prices. In March, the CREA reported that the national average price of $678,331 decreased by 3.7% from 2024. Buyers previously priced out of Toronto and Vancouver may also find new opportunities in today’s market. Vancouver and Toronto’s average prices decreased year-over-year by 5.8% and 2.5%, respectively, representing an over $25,000 drop in each.
In Calgary, one of Canada’s most persistently in-demand real estate markets, softening demand is helping to create more balanced conditions. According to the Calgary Real Estate Board, home sales in March decreased by 18.8% from 2024, while inventory increased by 102.4%. This combination allowed the sales-to-new-listings ratio to drop to 54%, a considerable improvement from 83% in April 2024.
In a shifting market like this, working with a knowledgeable real estate professional is key. Whether buying or selling, an experienced agent can help you navigate local conditions, identify the right timing, and make the most of emerging opportunities.
Do you have questions about the recent rate drop or conditions in your local market? Our real estate agents are here to help. Give us a call today to speak to an agent in your area.
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