On September 17, 2025, the Bank of Canada announced its first rate cut since March, lowering the key lending rate by 25 basis points to 2.5%. Another cut may well follow in October as the central bank tries to balance a weak economy, a shaky labour market, and the ever-present weight of Canada’s real estate sector.

As a real estate law firm, we’re often asked: Does this mean the housing frenzy of 2020–2021 is about to return? The short answer is: No, not yet. Let’s unpack why.

A Weak Economy Driving the Decision

The Bank’s move wasn’t about generosity. It was about necessity. Canada’s economy has been limping:

• GDP contracted in Q2 2025, signaling slower growth.

• Unemployment is now over 7%, one of the highest in recent years.

• Inflation is stable, but household spending power is shrinking fast.

To put it plainly: when 50% of the average Canadian’s income is eaten up by rent and food, and Food Banks Canada reports a 40% surge in usage, it’s clear the foundation of the economy is under stress.

Who Wins and Who Loses?

Lower rates sound great, but they’re not a win for everyone.

• Borrowers benefit: Homebuyers on variable mortgages or those shopping for new loans will see some relief.

• Savers lose out: GICs and savings accounts will yield less. This often frustrates retirees and cautious investors — but the government’s priority is keeping the real estate market afloat.

And make no mistake: real estate is central to Canada’s economy.

Real Estate Market: A Boost, But Not a Boom

Realtors have had one of their worst years in decades. Transactions stalled, bidding wars cooled, and cautious buyers sat on the sidelines.

The September rate cut — and a possible October cut — will bring some buyers back. But don’t expect the wild, speculative bidding wars of the pandemic years. Why?

Because the economy simply isn’t strong enough to support it. Household budgets are squeezed, job security is fragile, and consumer confidence is weak. That doesn’t create conditions for a runaway housing boom — it creates conditions for slow, cautious recovery.

What This Means If You’re Buying or Selling

From a legal and practical perspective:

• Buyers: Rate cuts may lower mortgage costs, but affordability is still a major challenge. Be realistic about your budget and seek legal advice before signing firm agreements.

• Sellers: Don’t assume multiple offers will flood in overnight. The market is stabilizing, not skyrocketing.

• Investors: Rental demand remains strong, but rising food and housing costs mean tenant affordability is under pressure. Legal protections and clear contracts matter more than ever.

Our View

At Nirman’s Law, we see rate cuts not as the return of “easy money,” but as a sign of just how fragile the Canadian economy is right now. Yes, borrowing is slightly cheaper, but systemic affordability issues remain unsolved.

If you’re entering into a purchase, sale, or refinancing transaction, proceed with eyes wide open. Legal due diligence — from title searches to contract clauses — is your safeguard in a market that’s anything but predictable.

Final Word

The Bank of Canada may cut rates again in October, but lower borrowing costs alone won’t fix Canada’s affordability crisis. Until wage growth, job stability, and cost-of-living pressures improve, housing will remain a delicate balancing act between opportunity and risk.

Disclaimer

The information provided in this article is for general informational purposes only and should not be interpreted as legal, financial, or professional advice. While we strive to ensure accuracy, certain references, including economic data and market commentary, rely on third-party sources. Search engine optimization (SEO) tools and indexing may also involve external platforms beyond our control, and occasional errors or omissions may occur.

This content does not create a lawyer-client relationship, nor should it be relied upon as a substitute for tailored legal advice. If you have specific questions about how interest rate changes or market conditions affect your real estate transaction, please contact our office directly for advice suited to your circumstances.

For corrections, clarifications, or further inquiries, we welcome you to email us.