Ottawa | September 27, 2025 — The Bank of Canada’s recent rate cut to 2.50 % was designed to inject energy into the country’s sluggish housing sector, but the initial response from borrowers and lenders has been cautious rather than exuberant.

Lower Rates, Limited Bounce

The central bank’s 25-basis point reduction earlier this month lowered the policy rate to a three-year low. While this move theoretically makes borrowing cheaper, housing sales activity has only shown modest upticks so far. Realtors report that buyers remain wary amid economic uncertainty and affordability constraints.

Relief for Variable-Rate Borrowers

For households already carrying variable-rate mortgages, the cut has provided tangible relief.

One estimate suggests that on a typical mortgage of about CAD 624,000, payments could drop by roughly CAD 84 per month if rates fall from 3.95 % to 3.70 %.
Brokers note that the lowest advertised five-year variable rates are hovering near 3.6 %, though many borrowers still pay slightly higher depending on credit and down payment profiles.

This relief, however, may be incremental rather than game-changing, as debt servicing costs remain elevated compared to pre-2022 levels.

Fixed Rates Slow to Adjust

Unlike variable mortgages, fixed-rate products remain more insulated from immediate rate changes. Because they are tied to bond yields rather than the overnight rate, five-year fixed rates have been slower to move downward.

Analysts caution that fixed-rate borrowers renewing in 2025 may still face higher monthly payments than they had in earlier terms, even with the Bank of Canada’s latest easing cycle underway.

Lender Adjustments & Risk Caution

Some lenders are taking a conservative approach despite lower borrowing costs. BMO, for instance, recently tightened criteria for borrowers in steel and aluminum sectors, citing trade-related risks. This signals that banks may prefer caution in underwriting rather than chasing new loan growth aggressively.

Housing Market Response

Early data suggests a slight increase in purchase inquiries, especially among first-time buyers who had been priced out in 2023–24. However, market watchers stress that the rebound could be uneven:

Major Cities: Toronto and Vancouver continue to face high price-to-income ratios, limiting affordability gains.
Secondary Markets: Regions like Calgary and Halifax may see quicker pickup due to more moderate home prices.

What It Means for Homebuyers

The current environment creates both opportunity and risk. Those willing to take on a variable mortgage may benefit from short-term relief, but the broader economic uncertainty means buyers should remain cautious. Fixed-rate borrowers, meanwhile, will need to shop aggressively to secure the best renewal terms.

Outlook: Patience Required

The Bank of Canada’s rate cuts are unlikely to create a dramatic surge in housing activity. Instead, the adjustment may gradually filter through the market over the next few quarters. Buyers, sellers, and lenders alike appear to be bracing for a patient recovery rather than a rapid rebound.