Market Update: Bank of Canada Cuts Rate to 2.25% A Positive Shift for Buyers and the Housing Market

The Bank of Canada has lowered its overnight rate by 25 basis points to 2.25% as inflation continues to trend downward. Governor Tiff Macklem emphasized that while inflation pressures have moderated, the Bank remains cautious, aiming to support growth without reigniting price instability.

This rate cut is expected to provide relief to borrowers, particularly in the housing and mortgage markets, where affordability has been under pressure from higher interest rates. However, the Bank noted that further cuts will depend on continued progress toward its 2% inflation target and sustained signs of economic softness.

After five consecutive months of rising activity, Canadian home sales slipped in September 2025, down 1.5% from August, according to the Canadian Real Estate Association (CREA).The decline reflects both limited new listings and a bit of buyer caution as the market awaits Bank of Canada rate cuts later this year. 

Even with the pause, home prices held steady, rising slightly both month-over-month and compared to last year. The market overall still leans toward sellers, thanks to tight supply and steady demand. Once rates begin to come down, many experts expect activity to pick back up as buyers who’ve been sitting on the sidelines jump back in. In short, September’s slowdown looks more like a brief pause than a turning point. The housing market is still showing plenty of strength.

Meanwhile, inflation ticked a little higher in September, coming in at 2.4% compared to 1.9% in August. The increase mostly came from higher gas and energy prices, while grocery and core inflation which is what the Bank of Canada watches most closely. Economists don’t see this as a setback, since inflation remains close to the Bank’s 2% target.

That means the outlook for further rate cuts remains on track. With inflation under control and the economy showing signs of slowing, the Bank of Canada still has room to start lowering rates later this year or early next. For homeowners and buyers, that’s great news. Lower rates could gradually improve affordability and give the housing market a nice boost heading into 2026.

Whether you’re planning to buy, refinance, or just want to explore your options before rates change, now’s a great time to review your mortgage strategy. Reach out to our team anytime to chat!