The central bank's move to bring rates lower could boost homeowner and buyer confidence
Bank of Canada governor Tiff Macklem was keen to emphasize that this week’s interest rate cut could be its last of the year – but the decision to lower rates has been greeted as a positive move for Canadian homeowners and buyers.
The central bank trimmed its benchmark rate to 2.25% on Wednesday, meaning that rate, which leads variable mortgage rates in Canada, has now fallen by 175 basis points since June of last year.
And while a December cut may or may not be in the offing, things are trending in the right direction for Canadians in the housing market, according to TD Bank assistant vice president, real estate secured lending Crystal Leigh (pictured top).
She told Canadian Mortgage Professional the decision, which came as no surprise to most market watchers, marked a further sign that rates are stabilizing.
“They’re stating that they do see the policy rate at about the right level,” Leigh said of the Bank’s announcement. “If I think about what that actually means for Canadians, it comes as a relief as many Canadians have been waiting to make that important purchase decision.
“So think about lowering the cost of borrowing for Canadians. It really provides an opportunity for Canadians to feel more optimistic. And those sitting on the sidelines may enter the market as they benefit from this reduction.”
Canadians facing mortgage renewals get some good news
A trend toward “more normal interest rates” was noted by Canadian Real Estate Association (CREA) senior economist Shaun Cathcart as a reason to expect stronger homebuying activity in 2025’s final quarter and throughout 2026.
Canada’s central bank lowered its key rate to 2.25%, but Governor Tiff Macklem cautioned against expecting further cuts, citing the economy’s “structural transition” amid US trade pressures.https://t.co/5W831OQuqN
— Canadian Mortgage Professional Magazine (@CMPmagazine) October 30, 2025
For Canadians who own a home and have a mortgage renewal looming, the latest quarter-point cut is also a positive development.
A series of rapid rate hikes by the central bank in 2022 and 2023 to curb inflation sparked fears of an impending renewal cliff and potential sharp pain for homeowners facing renewals at much higher rates.
Those concerns have eased somewhat thanks to the Bank’s nine cuts in the last 16 months, meaning that while most homeowners who took out their mortgage during the COVID-19 pandemic in 2020 or 2021 are still facing steeper payments, the picture is no longer as alarming as before.
Leigh referenced a recent TD survey showing Canadians were knuckling down and taking a responsible, pragmatic approach to their finances amid current economic challenges.
“Many of our Canadians – 73% – indicated that they’re thinking more seriously about cashflow and they’re looking to tighten their pocketbooks as it relates to planning for potentially higher payments despite the [Bank of Canada] reduction,” she said.
“They’re looking at reducing nonessential spending and even drawing down from investments in some cases to make the cashflow work.”
Homeowners still gravitating towards fixed-rate mortgages
The past few years haven’t exactly been stress-free for the Canadian economy, with surging inflation triggering a cost-of-living crisis and continued post-pandemic volatility.
2025 hasn’t been serene either, with no sign that trade tensions between Canada and the US are fading yet.
Economists including Canadian Imperial Bank of Commerce (CIBC) deputy chief economist Benjamin Tal have flagged the risk that Canada’s economy is in a worse position than official figures indicate – and has even potentially entered a recession.
And a continuing lack of clarity over the outlook for the economy and whether a further downturn could be on the way is just one of the reasons many Canadians are continuing to choose the security of a fixed-rate mortgage.
That trend has remained strong even despite the Bank’s rate cuts, which have seen variable rates dip lower as a result.
“As we talk to Canadian renewers, we observe that about 75% of them are actually preparing to renew into a fixed-rate mortgage versus a variable-rate mortgage this go around,” Leigh said.
“While there’s no one-size-fits-all approach for Canadians, we do see that the majority of Canadians are looking for that sense of security and having a consistent payment over the remaining term of their mortgage.”
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