How Election Promises Could Shape Canadian Mortgage Rates in 2025

As Canada heads toward the 2025 federal election, the housing market and mortgage rates are hot-button issues for millions of voters. While it’s true that campaign promises don’t directly set mortgage rates, they play a major role in shaping the broader economic environment—and that, in turn, impacts what you pay when borrowing for a home.
Whether it’s the Liberals pitching bold investments in innovation and housing affordability, or the Conservatives pushing fiscal restraint and supply-driven growth, each vision could take the country down a different path on inflation, interest rates, and homeownership access. Let’s break it down.

Liberal Approach: Stimulus Spending, Innovation, and Housing Affordability

Under the leadership of Prime Minister Mark Carney, the Liberal Party is making a clear pitch: tackle today’s affordability crisis while preparing Canada for the economy of tomorrow. Their platform promises tax cuts, housing investments, and strategic funding in artificial intelligence, infrastructure, and national defence.
To start, the Liberals propose cutting the lowest federal income tax bracket from 15% to 14%. This alone could put hundreds of extra dollars annually into the pockets of middle-income households—money that could go toward housing.
But the heart of the Liberal strategy lies in investment: $6 billion for a new National Housing Affordability Fund, the removal of GST on homes up to $1 million, and direct funding to expand rental housing supply. At the same time, they’re committing to long-term growth by pumping money into AI innovation and clean infrastructure.

Could Liberal Spending Push Rates Higher or Lower?

At first glance, big government spending sounds like it might fuel inflation. But the Liberals argue their investments are targeted and productivity-focused, aiming to relieve long-term cost pressures.

For example, building more housing stock should ease demand pressures in hot markets, which could help cool rising prices. Similarly, boosting productivity through infrastructure and AI could lower costs in the long run—helping fight inflation instead of stoking it.

That said, in the short term, these programs could still increase government deficits, prompting the Bank of Canada to stay cautious. If inflation stays sticky due to higher spending, mortgage rates may remain elevated for a while.

Conservative Approach: Supply, Discipline, and Economic Restraint

The Conservatives are taking a more traditional fiscal approach, promising to unlock federal lands for development, cut permitting red tape, and incentivize cities to increase density. Their plan puts housing supply—not subsidies—at the centre of affordability reform.

They also plan to balance the federal budget within five years, cutting unnecessary programs and streamlining government expenses. The hope? That tighter fiscal control will reduce inflation, increase investor confidence, and lower borrowing costs across the board.

Will Conservative Discipline Lead to Lower Rates?

If the Conservative plan effectively reduces inflation without sacrificing growth, mortgage rates could come down. That’s because the Bank of Canada tends to lower interest rates when inflation is under control.
However, supply-side solutions take time. Building homes doesn’t happen overnight. If the government cuts spending too sharply or delays critical infrastructure and climate adaptation projects, Canadians might end up paying more down the road in the form of climate damages or infrastructure failures—which could push prices and inflation back up.

“For a deeper breakdown of potential borrower impacts, see our full analysis on how specific election promises could affect mortgage rates across Canada.”

What Actually Determines Mortgage Rates?

The biggest player in mortgage rates remains the Bank of Canada. It adjusts its policy rate in response to inflation, GDP growth, employment trends, and global conditions.
While election promises influence these conditions indirectly (especially through spending and investment), the BoC is independent and reacts to data, not politics.

If post-election spending sends inflation up, expect rates to stay high. If either party succeeds in cooling inflation—through housing supply, productivity, or fiscal restraint—we might see the Bank ease its stance and lower rates.

What Should Homebuyers and Homeowners Do in an Election Year?

If you’re planning to buy or renew your mortgage, it’s smart to be proactive before policy changes take effect.
Even a 0.25% shift in rates can add hundreds to your monthly mortgage. Locking in a fixed rate, or exploring your renewal options early, might help you avoid any election-induced rate surprises.

Final Thoughts

The 2025 election won’t directly set your mortgage rate, but it will absolutely shape the financial landscape that determines it.
Whether you believe in stimulus or restraint, productivity or deregulation, the big question is: which strategy do you think will best fight inflation while keeping homeownership within reach?
Your vote matters—not just for policy, but for your pocket. And your mortgage.
Stay informed. Stay ahead.
If you want to know how Mortgage Rates determined in Canada. Click Here

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