In a move that surprised no one, the Bank of Canada (BoC) has announced its second consecutive half-point cut to its benchmark interest rate, now sitting at 3.25%. This marks the fifth rate reduction in a row, despite inflation ticking up from 1.6% in September to 2% in October — right on the BoC’s target. While inflation remains manageable, concerns about Canada’s economic health persist.

What This Means for Canada’s Housing Market

The Canadian housing market is showing clear signs of a rebound. According to RE/MAX Canada’s latest market outlook, buyer confidence has been reignited, driven by these recent rate cuts and the expectation of more to come in 2025.

Here’s what’s shaping the market:

• More Listings, More Buyers: Sellers have started listing properties again as buyers return to the market.

• Rising Prices Ahead: The national average residential price is projected to climb by 5% in 2025, with sales expected to rise in 33 of 37 surveyed markets, some by as much as 25%.

• Affordability Challenges Remain: While lower rates provide relief, limited inventory means prices could rise further, adding pressure on first-time buyers.

“The housing environment is looking much better for Canadians heading into 2025, but affordability challenges won’t disappear overnight,” said Christopher Alexander, President of RE/MAX Canada.

What’s Next for Interest Rates?

The BoC has eight scheduled policy rate announcements each year. Here’s the 2025 schedule:

• January 29

• March 12

• April 16

• June 4

• July 30

• September 17

• October 29

• December 10

BoC’s Policy Decision Explained

The Bank of Canada cited slowing economic growth as a key reason for its latest rate cut. While the US economy remains strong, Canada’s third-quarter growth came in at just 1%, below earlier projections. Business investment and exports have weakened, but consumer spending and housing activity have shown resilience, likely boosted by lower borrowing costs.

Other factors influencing the BoC’s decision include:

• Global Financial Conditions: Eased somewhat, though the Canadian dollar has weakened against a strong US dollar.

• Employment & Wages: Unemployment rose to 6.8% in November, while wage growth, though easing, still outpaces productivity.

Looking Ahead: Key Risks and Expectations

Several uncertainties remain on the horizon:

• Policy Changes: Reduced immigration targets and temporary consumer tax breaks could dampen growth and inflation next year.

• Global Trade Risks: Potential US tariffs on Canadian exports continue to cloud the outlook.

The BoC remains focused on keeping inflation near its 2% target while supporting economic growth. More rate cuts could be on the table if inflation stays in check and economic indicators remain soft.

Stay tuned for more updates as we navigate this evolving financial landscape.

Image Source: Colin Rose from Montreal, Canada, CC, Wikimedia Commons