Mission, BC – July 31, 2025 – The Canadian housing market often feels like it’s on a rollercoaster, but for now, it seems the Bank of Canada (BoC) has pressed the pause button. Yesterday, July 30th, the Bank of Canada announced it’s keeping its key interest rate target at 2.75% for the third time in a row. This comes after a series of seven consecutive rate drops, offering a moment of stability in borrowing costs that many housing owners and prospective buyers will appreciate.

However, a deeper dive into the Bank of Canada’s latest Monetary Policy Report (MPR) reveals that beneath this calm surface, significant economic currents are at play. The central bank isn’t offering its usual firm forecast; instead, it’s laid out three distinct scenarios, all shaped by the unpredictable winds of global trade, particularly US tariffs.

Three Paths Forward: Understanding the Economic Landscape

The Bank of Canada’s decision to present multiple scenarios rather than a single projection underscores the high degree of uncertainty currently facing the Canadian economy. These scenarios offer a glimpse into how different trade outcomes could influence everything from economic growth to inflation, and by extension, the housing market.

1. The “As Is” Scenario: Navigating the Current Trade Winds

This is the Bank of Canada’s base case, where tariffs remain at their current levels. In this world, global growth slows a bit in 2025 before picking up in 2026. Here in Canada, we might see a slight contraction in economic output this quarter, but the second half of the year should bring a modest recovery. Inflation, thankfully, is expected to hover around the 2% mark.

What does this mean for your home? A slower economic recovery generally translates to a more subdued housing market. While some pent-up demand might stir things up later in the year, don’t expect a sudden surge in activity or widespread price jumps, especially in pricier areas like Ontario and British Columbia. Stability in inflation, however, means the current stable interest rate environment is likely to persist.

2. The “De-escalation” Dream: A Brighter Outlook

Imagine a world where trade tensions ease, and tariffs are reduced or even removed. The Bank of Canada suggests this scenario would ignite faster economic growth and help tame inflation further.

For real estate, this would be a breath of fresh air. Stronger economic growth means more jobs and greater consumer confidence, which are key ingredients for a vibrant housing market. Lower inflation could even open the door for the Bank of Canada to consider further rate cuts, making borrowing even more affordable and potentially giving home sales and prices a welcome boost.

3. The “Escalation” Challenge: Prepare for Choppy Waters

On the flip side, what if tariffs expand further? The Bank of Canada warns this could lead to continued economic contraction through 2025, coupled with higher inflation and a slower, more painful recovery.

This scenario would certainly cast a long shadow over the housing market. Economic contraction and job market jitters often make buyers hesitant, impacting affordability. Moreover, higher inflation, potentially driven by rising import costs, could push fixed mortgage rates upward. In such an environment, we might see more significant price adjustments and a noticeable slowdown in real estate transactions across the country.

What This Means for Your Mortgage and Housing Ownership Journey

So, with these scenarios in mind, what’s the practical takeaway for Canadians?

First and foremost, if you have a variable-rate mortgage, enjoy the consistency. Your payments are holding steady for now, offering a welcome reprieve. For those contemplating a new mortgage or an upcoming renewal, this period of rate stability provides a solid window to assess your options.

Beyond the immediate, remember that the economy’s dance with global trade is a crucial one. Keep an eye on geopolitical news; developments on the trade front could very well dictate the Bank of Canada’s next moves. The good news is that the Bank of Canada has hinted at the possibility of future rate cuts if those trade tensions ease and inflation pressures cool down. That’s a hopeful note for those looking for even more affordable borrowing in the future.

Lastly, if your housing mortgage is up for renewal in 2025 or 2026 – and a significant number of Canadians are in this boat – now is the time to plan ahead. Many homeowners are stepping out of historically low fixed rates, and higher payments could be a reality. Engage with your lender or a mortgage broker early to explore strategies like extending your amortization or making lump-sum payments to ease the transition.

Marking Your Calendar: Upcoming Bank of Canada Dates

The Bank of Canada’s next scheduled interest rate announcements for 2025 are:

  • September 17
  • October 29
  • December 10

These dates will offer further insights into how the central bank is interpreting the economic signals and what they might mean for your personal finances and the broader Canadian real estate landscape. In these uncertain times, staying informed and planning proactively remains your best strategy.