Is a cut on the way – and could it heat up the housing market?
The eyes of mortgage and housing market watchers are on the Bank of Canada again this week as the central bank prepares for its next announcement on interest rates, a decision many believe could herald the beginning of another cutting cycle.
Economic data seems to point towards a likely reduction in that September 17 call, probably by 25 basis points. While inflation ticked up to 1.9% in August – a development that would normally call a cut into question – most economics believe a sluggish jobs outlook and slowing economy have given the Bank the green light to move rates lower.
The national economy contracted in the second quarter of the year, Statistics Canada said last month, as tariff and trade turmoil weighed against growth. Meanwhile, the labour market shed 66,000 jobs in August, signalling that some of its resilience seen at the beginning o the year is fading fast.
What the BoC’s language could signal about further cuts
A quarter-point cut alone might not move the needle much for the housing market or convince a wave of buyers to step off the sidelines. But plenty will be keeping a close eye on governor Tiff Macklem’s press conference after the Bank announcement to see if he sheds any light on whether decisionmakers are eyeing further cuts in the months ahead.
In the US, where the economy is also softening rapidly, analysts believe a flurry of rate reductions could be on the way. The Federal Reserve has kept rate cuts on hold throughout the year so far – but Morgan Stanley now says it’s likely to lower rates in each of its final three remaining meets in 2025 and once again in January.
It remains to be seen whether the Bank of Canada – which has already cut rates this year, and whose benchmark rate is currently significantly lower than the Fed’s – will act similarly. But a worsening economic outlook in Canada generally signals that lower interest rates are on the way, bringing borrowing and mortgage costs down.
“We still have to wait and see how the team over at the Bank of Canada decides to evaluate this and see it,” Leah Zlatkin (pictured, top left), chief operating officer and mortgage broker at Mortgage Outlet in Toronto, told Canadian Mortgage Professional.
“But certainly, the economy is not looking so great right now and if that has been any indication in the past, we typically see drops at that point.”
Housing market unlikely to surge straight away
Canadian Real Estate Association (CREA) senior economist Shaun Cathcart suggested lower rates could stir an uptick in fall housing market activity after new figures revealed national sales posted their best performance in four years.
New sales figures released by the Canadian Real Estate Association (CREA) on Monday morning showed that the Canada-wide market had reported its best August since 2021, when activity surged because of rock-bottom interest rates.https://t.co/GnZBBZyutr
— Canadian Mortgage Professional Magazine (@CMPmagazine) September 15, 2025
“If last year is any kind of guide, then there is the potential that sales could really pick up in the next month or so depending on how many buyers are drawn off the sidelines,” he said, “particularly if we see a September rate cut by the Bank of Canada.”
Still, that’s not to say the market will roar back anytime soon. Tracy Valko (pictured, top right), founder and CVO at Valko Financial, told CMP buyers with job and financial security could be buoyed by rate cuts, but that market activity is still highly dependent on location and quality of property.
“I think it’s a market with different dynamics to it,” she said. “I think there’s the one where if the clients have a really great job and they’re secure in it, where they see a future in their employment and they’ve been saving money because they’ve been sitting on the sidelines waiting to see what’s happening with the economy, with tariffs, with inflation, and specifically rates, there are people coming out of the woodwork to look at buying a home.
“[But] I really think it’s depending on what street it’s on, if it’s close to great schools, because there’s a lot more inventory. People are being very specific in those areas that are doing really well, that have great school ratings, and it’s a great street to be on. We’re seeing that momentum start to pick up. But if the house needs a lot of work, then it’s a different story.”
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