The Bank of Canada Cut Rates… But What Does It Really Mean?

January 29, 2025

A 25-Point Cut: Good News or a Temporary Illusion?

The Bank of Canada has officially cut interest rates by 25 basis points, a move many have been eagerly waiting for. At first glance, this sounds like great news—lower borrowing costs, potentially more affordable mortgages, and a step toward economic stability.

But—and it’s a big but—there’s more to the story.

While lower rates provide some relief, they don’t exist in a vacuum. Canada’s economic and political landscape is still filled with uncertainty, and that could affect the real estate market, employment, and overall financial stability.

Here’s what’s happening right now:

1. No Federal Leadership Until March

The Liberal Party is currently in the process of selecting a new leader, which means key policy decisions—particularly around housing and economic stimulus—are delayed. Until a new leader is in place, many economic initiatives are in limbo.

2. Two Upcoming Elections

Both provincial and federal elections are on the horizon, which could drastically change fiscal policies, tax structures, and housing regulations. Markets typically slow down before elections, as both buyers and sellers wait for clarity on economic policies.

3. We Are in a Recession with Ongoing Layoffs

Recent months have seen major layoffs across multiple industries, signaling that the economy is still struggling. Even with rate cuts, consumer spending and job security remain fragile. Lower interest rates might help with affordability, but if people are losing jobs, can they still afford homes?

4. Potential Tariff Threats Could Hurt the Economy

New trade barriers could impact the economy negatively, offsetting the benefits of lower interest rates. If global trade slows down or becomes more expensive, it could lead to higher costs for goods and services, inflationary pressures, and overall economic instability.

Even with all this uncertainty, some long-term trends are clear:

1. Housing Supply is at Historic Lows

New construction—especially for ownership housing—has practically stalled. The only major developments happening now are purpose-built rental buildings, which means homeownership opportunities will continue to be limited.

2. Immigration May Have Slowed, But It Will Pick Up Again

Recent immigration rates have slightly decreased, but Canada’s long-term demographic trends show continued population growth. This means that housing demand will remain strong in the years to come.

3. The Real Estate Cycle Always Repeats Itself

Historically, every economic downturn has been followed by years of prosperity. If we follow the patterns of previous recessions, those who stay the course and make informed real estate decisions tend to benefit in the long run.

With so much uncertainty, how should you approach real estate right now?

• If You’re Buying: Think long-term. Timing the market perfectly is impossible. If you can afford to buy and hold, real estate remains a solid investment.
• If You’re Selling: Low inventory might work in your favor—there aren’t many homes on the market, so well-priced properties are still selling.
• If You’re Investing: The rental market remains strong, and with supply tightening, demand for rentals will likely keep increasing.

We are living in unpredictable times, and no one—not even the experts—can say for certain what will happen next. But one thing is clear: real estate has always been a long-term game.

Yes, there are challenges. Yes, uncertainty makes planning difficult. But history shows that after every downturn, there’s a rebound. Those who stay informed, stay flexible, and make smart decisions today will be the ones who benefit when the market stabilizes.

If you have questions about what this rate cut means for your buying, selling, or investment plans, let’s chat!