Bank of Canada Analysis: Is This The Rate Cut Home Buyers Have Been Waiting For?

Remember back in 2024, when each Bank of Canada rate cut felt like the dawn of a new spring for Canada’s iced-over housing market? Lower rates were going to provide a long-awaited thaw, triggering a cleansing flood of pent-up demand.

Those were good times. Good, delusional times.

After the Bank’s latest overnight rate decision, a 25-basis point decrease announced on October 29, its easing cycle is now nine cuts deep, including two 50-basis point reductions to close out 2024. Their impact on the housing market has been minor.

Home sales in 2025 have been resilient in the face of unprecedented trade challenges, but on a national level, they’re down year-to-date versus the same period in 2024. In September, after the Bank’s previous cut brought variable mortgage rates down to around 3.7%, home sales fell for the first time since April.

There are plenty of reasons to think the Bank’s latest rate cut will generate similarly lacklustre results.

Persistent challenges the BoC can’t fix

Crushing daily expenses

Inflation has displayed an insatiable appetite for Canadian wages. In September, annual inflation rose to 2.4% as Canadians paid more for food, shelter and transportation.

According to the MNP Consumer Debt Index for October 2025, 43% of Canadians — nearly 17.9 million of them — reported being $200 or less away from insolvency. These people won’t be buying a home anytime soon. Even those who have money left over after paying their bills reported an average remaining amount of only $744 — hardly enough to cover a mortgage payment in most cases.

And when consumers struggle with cash flow, another equally imposing barrier tends to spring up between them and their dreams of homeownership: debt.

Debt, debt and more debt

A reduction in the overnight rate is typically met with a similar reduction in variable interest rates. It eases the interest burden on some consumers with debt, but that’s peanuts if you’re regularly leaning on a credit card for survival.

Many Canadians are doing just that. NerdWallet’s May 2025 Canadian Consumer Credit Card Report found that 74% of Canadians had used credit cards to pay for essentials in the previous 12 months.

If a household needs credit to make up for a cash shortfall, it’s fair to assume their credit balances are going to pile up, throwing its debt service ratios out of whack. Mix in other debts like auto or student loans and most mortgage lenders will see enough risk to hold back their best rate offers.

And that’s if credit payments are being made on time. Equifax found that almost 1.4 million Canadians missed a credit payment in the second quarter of 2025, each one leaving a bruised credit score and scarred credit report in its wake.

The Bank of Canada doesn’t possess a tool that can hack these obstacles down to size.

The uncertainty effect

Since it’s 2025, we should probably set aside the quantitative data for a minute and talk about vibes.

Even if a household can afford to buy a home right now, holding off might feel like the safer option considering today’s testy economic climate.

None of us know what sudden turns the U.S.’s erratic trade policy will take, or how it might impact our employers’ ability to pay us over the coming months. This uncertainty is compounded by fears around recession and unemployment, and the malaise Canadians feel about their finances.

That’s not an ideal backdrop for a thriving housing market. And now that the Bank of Canada is prioritizing the country’s financial health over inflation, it reinforces the idea that the economy is trending in the wrong direction.

On the bright side

Once lenders have absorbed the Bank of Canada’s latest cut, five-year variable mortgage rates will drop to around 3.5% at several brokerages and some direct lenders. That’s the lowest that variables have been in over three years.

Some buyers will jump at a deal like that, regardless of today’s dodgy economic climate and the risk of variable rates eventually rising. Others will finally be able to qualify for mortgages they can afford.

It’s hard to imagine anyone in a delicate financial situation — first-time buyers going it alone, would-be move-up buyers who are holding on by their fingernails, anyone worried about their job security — taking out a mortgage right now.

Buyers with deeper pockets, robust down payments and the ability to take on more risk, though? The market’s tilted heavily in their favour. Savvy investors and buyers with parental financial support should be able to ride lower rates and rising inventory to some nice wins.

Whether those sales move the needle for the housing market in the final two months of the year is doubtful. As much as Canadians desire owning a home, they have to feed themselves, too. For too many of us, it’s getting awfully hard to do both.