A Step in the Right Direction For Housing as Bank of Canada Lowers Rates to 2.25 Percent

What the Second Consecutive Rate Cut Means for Homeowners, Buyers, and Agents

October 29, 2025 – The Bank of Canada lowered its key interest rate by another 25 basis points today, bringing the overnight lending rate to 2.25%. This marks the second cut in as many months as the central bank works to support an economy showing signs of slower growth and rising unemployment.

While the move is welcome news for homeowners with variable-rate mortgages or renewals on the horizon, experts say it may not be enough to spark a major upswing in home sales just yet.

“This is a step in the right direction,” explains Karim Kennedy, CEO of Coldwell Banker Canada. “The cut sends a signal that the Bank of Canada is aware of the pressures Canadians are facing, especially homeowners with renewals coming up in 2026. It provides some breathing room, but it is not a magic wand. Affordability challenges remain, and the market is still adjusting to a new normal.”

The Bank’s latest Monetary Policy Report projects that inflation will stay close to 2%, with growth improving slowly through 2026. The central bank also noted that new United States tariffs are reshaping Canada’s economy and creating added uncertainty for businesses and consumers.

Even so, the rate cut alone may not change the pace of the housing market. According to Rates.ca, a 25 basis point decrease saves about $15 dollars per $100,000 dollars of mortgage in monthly payments. That helps, but it is only a modest improvement.

“For buyers who have been waiting for a sign of stability, this is it,” Kennedy says. “Confidence matters. Even a small rate cut can shift the psychology of the market. It reminds people that borrowing costs have likely peaked, and that can bring some buyers back to the table, especially in balanced or more affordable markets.”

In many parts of the country, prices are down between 10 and 20% from their pandemic highs, but there is still a gap between housing prices and wages. Kennedy points out that for financially ready buyers, this may be an opportunity to act while competition is lower and inventory remains healthy.

What it means for homeowners and sellers

For existing homeowners, today’s cut offers a little relief on variable rate payments and a signal that stability is returning. With approximately 1.8 million mortgages set for renewal in the next 12 months, many households will feel modest rate relief as welcome news.

“For sellers, this is the time to stay patient and strategic,” Kennedy noted. “There is more activity than there was six months ago, but buyers remain careful. Homes that are priced correctly and presented well are selling. The market is moving, just at a steadier pace.”

Realtors across the Coldwell Banker Canada network are also reporting more inquiries from pre-approved buyers who had been waiting for signs that the tide was turning.

Looking ahead

The Bank of Canada has indicated that this level of interest rates may be “about right” for balancing inflation control and economic support. That could mean the next few months bring a pause rather than another immediate cut.