Date: September 17, 2025
The Bank of Canada lowered its policy interest rate to 2.50% this morning, marking the first cut in six months and the lowest level in three years. The decision comes at a time when Canada’s economy is showing signs of strain and is intended to stimulate growth while maintaining stability in financial markets.
Why Did the Bank Cut Rates?
In the second quarter of 2025, Canada’s GDP contracted at an annualized rate of 1.6%, reflecting a slowdown in business investment and consumer spending. Labour market conditions have also worsened, with roughly 65,500 jobs lost in August alone. This pushed the unemployment rate up to 7.1 percent, the highest level in nine years outside of the pandemic period. Inflation pressures, meanwhile, have eased. The Consumer Price Index (CPI) rose 1.9% on a year-over-year basis in August, up from a 1.7% increase in July. While core inflation held around 2.5%, near the upper end of the Bank’s 2% target range. In response to these trends, the Bank of Canada acted to reduce borrowing costs, shore up employment, and restore consumer and investor confidence.
Broader Economic Impact
The immediate effect of the rate cut is to make credit more affordable. Lower interest rates reduce financing costs for households carrying mortgages, car loans, or credit card debt, freeing up more disposable income for other expenses. Businesses also benefit from cheaper borrowing, which could encourage investment and hiring. Inflation is likely to remain subdued, staying within the target band, but the central bank will continue to monitor the risk of price pressures re-emerging. For the housing market specifically, the move is expected to lift buyer sentiment and revive market activity after several months of caution.
What This Means for Real Estate
For buyers, the reduction in the policy rate offers immediate and tangible benefits. Those with variable-rate mortgages will feel relief in their monthly payments, while those approaching renewals or entering the market for the first time may be able to lock in lower fixed rates. With borrowing costs easing, the opportunity exists to purchase before competition intensifies and prices adjust upward. However, buyers should remain mindful of the broader economic context, particularly with unemployment at a nine-year high, and ensure their income stability before taking on new debt.
For sellers, the environment is likely to become more favourable as affordability improves for buyers. A more active market increases the chances of quicker sales, but success will still depend heavily on pricing strategy and professional marketing. Overpricing remains a risk, especially in a market where buyers remain cautious despite cheaper credit. Sellers who bring well-presented, competitively priced properties to market now may benefit from renewed buyer interest before additional cuts or shifts in sentiment change the dynamics again.
Conclusion
By cutting the policy rate to 2.50%, the Bank of Canada has signalled a commitment to supporting growth during a period of economic weakness. The decision has implications for every sector of the economy, but the housing market will feel its effects most immediately. Buyers can take advantage of reduced borrowing costs, while sellers can benefit from improved demand. In both cases, strategy and timing will be critical.
For tailored advice on how this rate cut may influence your buying or selling plans, reach out to The Fisher Group (Royal LePage). Our team offers data-driven insights and customized strategies to help you move confidently in today’s changing market.
Contact The Fisher Group – Your Real Estate Experts in Oakville and the GTA
Fisher Yu
📱 647.598.8488
📧 [email protected]
🌐 thefishergroup.ca
