Bank of Canada Maintains 2.75% Policy Rate: Housing Market Impact

Published by Ron Alfred De Guzman | MaxWell Realty Blogs | May 27, 2025

DISCLAIMER: This analysis is for informational purposes only. MaxWell Realty does not provide specific financial or investment advice to realtors, buyers, or sellers. The information presented should not be relied upon for making real estate or financial decisions. Always consult qualified professionals for personalized guidance.

The Bank of Canada held its overnight rate at 2.75% on June 4, 2025, marking the first pause since June 2024 (Bank of Canada, 2025a). With the Bank Rate at 3% and deposit rate at 2.70%, this decision reflects caution amid U.S. trade tensions and inflation concerns.

Economic Context

Inflation sits near the 2% target at 1.9% (January 2025), though core measures remain elevated due to persistent shelter costs (Bank of Canada, 2025b). GDP growth reached 2.6% in Q4 2024, but tariff uncertainties are expected to slow 2025 growth. Markets anticipated the hold (74% probability), aligning with the Bank's measured approach to trade policy developments.

Housing Market Implications

Interest Rates: The 2.75% policy rate keeps prime rates stable at 4.95%, maintaining predictable variable mortgage costs. Fixed rates may drop 50 basis points by year-end 2025 if bond yields remain low, potentially improving affordability in markets like Quebec and Alberta (True North Mortgage, 2025; WOWA.ca, 2025).

Market Challenges: Shelter inflation remains elevated at 4.5%, with 60% of mortgages renewing at higher rates over the next two years compared to 2020-2021 levels. Trade uncertainty may cause some buyers and sellers to adopt wait-and-see approaches.

Market Opportunities: Recent rate cuts have stimulated demand, with experts forecasting 6% home price increases in 2025 (BNN Bloomberg, 2024; Financial Post, 2024). The expanded $1.5 million insured mortgage cap (effective December 15, 2024) may benefit first-time buyers.

Realtor Considerations

Stable borrowing costs may encourage market re-entry, particularly for first-time buyers, potentially triggering an early spring market. However, economic uncertainty could reduce transaction volumes temporarily as clients seek value opportunities amid subdued competition.

Success requires staying informed about economic trends and clearly communicating how stable rates affect client affordability. In high-cost markets like Toronto and Vancouver, affordability constraints may persist despite rate stability.

Looking Ahead

The next Bank announcement is July 30, 2025. While some forecasters suggest potential 25-basis-point cuts if conditions warrant (nesto.ca, 2025; altrua.ca, 2025), the cautious approach indicates decisions will depend on trade developments and economic data. The intersection of stable rates, tariff impacts, and mortgage renewals will shape 2025 housing activity.

IMPORTANT: This content is provided for general informational purposes only and does not constitute professional advice. MaxWell Realty strongly advises against making real estate or financial decisions based solely on this information. Market conditions change rapidly, and individual circumstances vary significantly. Always consult with qualified real estate, financial, and legal professionals before making any decisions.

References

altrua.ca. (2025, May 28). Mortgage Rate Forecast Canada 2025-2028.

Bank of Canada. (2025a, June 4). Bank of Canada holds policy rate at 2¾%.

Bank of Canada. (2025b, March 11). Bank of Canada reduces policy rate by 25 basis points to 2¾%.

BNN Bloomberg. (2024, December 11). How will the Bank of Canada rate cut impact real estate?

Financial Post. (2024, December 11). Bank of Canada rate cut and what it means for the housing market.

nesto.ca. (2025, May 20). Mortgage Rates Forecast Canada 2025-2029.

True North Mortgage. (2025, June 1). 2025 Mortgage Rate Forecast.

WOWA.ca. (2025, January 30). Mortgage Interest Rate Forecast 2025-2029.