With a 50-basis point reduction bringing the key policy rate to 3.25 per cent, this marks the fifth consecutive rate cut since June. Experts anticipate the move will drive increased market activity, particularly during the typically quiet winter months.
The reductions in borrowing costs have sparked renewed interest among homebuyers. Following the first significant rate cut in October, demand has steadily climbed, with buyers responding to the reality of rising property prices. Many are motivated to act before affordability erodes further, potentially leading to an accelerated start to the spring housing market, traditionally the busiest time for real estate transactions.
Despite these developments, activity in the housing market remains comparatively subdued. Some experts attribute this to the seasonal slowdown and broader economic uncertainties. However, the recent announcement of changes to mortgage regulations, which will lower down payment requirements for homes priced between $1 million and $1.5 million, is expected to boost buyer confidence when it takes effect in mid-December.
Looking into 2025, real estate professionals are predicting an early resurgence in the housing market. Activity is likely to shift from favouring buyers to favouring sellers, with significant increases in demand expected. Prospective buyers are advised to secure mortgage pre-approvals now, as competition for desirable properties is anticipated to intensify.
In terms of home prices, Royal LePage forecasts an overall six per cent increase in the residential real estate market by the end of 2025. Detached homes are expected to see a seven per cent rise, while condominium prices will likely experience a more modest growth of around 3.5 per cent. Regionally, Toronto and Vancouver are projected to see aggregate price increases of five and four per cent, respectively, with variations across property types.
Mortgage rates have also been influenced by the central bank’s decisions. Fixed rates remain above four per cent, but variable rates are expected to drop below five per cent, enticing more borrowers to opt for variable-rate mortgages. This trend is likely to provide much-needed relief for Canadians renewing their mortgages in 2025 or managing unsecured debt.
The lower interest rate environment also presents opportunities for real estate investors. Reduced borrowing costs could drive property values higher, particularly in urban centres, as investors seek to capitalise on favourable conditions. Sectors such as residential, retail, and industrial real estate stand to benefit from increased demand and advantageous financing options.
Overall, while the market remains in a phase of gradual recovery, the Bank of Canada’s actions have set the stage for a dynamic start to 2025, with buyers, sellers, and investors all preparing to navigate an evolving real estate landscape.
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