Real estate executives welcome a cut to interest rates from the Bank of Canada, but remain concerned over trade uncertainty and the impact of tariffs on the economy and jobs market.
The central bank decided to cut the key lending rate by 25 basis points to 2.5 per cent, the first cut since March. Governor of the bank Tiff Macklem cited Canada’s softening labour market and the removal of most retaliatory tariffs by Canada as reasons for the rate cut.
“It’s a positive move for both the economy and, in particular, real estate,” Karim Kennedy, CEO of Coldwell Banker told BNNBloomberg.ca in a Wednesday interview. “We have had for quite some time a lot of consumers on the sidelines trying to get clarity. For most people, a home is their largest purchase they’ll ever make.”
The rate cut comes as inflation increased to 1.9 per cent, up from 1.7 per cent in August. The cut was expected by financial markets and many economists. Kennedy said the cut provides immediate relief for people to move forward with property transactions in November, December and early 2026.
Fixed vs. variable mortgage depends on risk tolerance
The rate decrease will have a direct effect on variable mortgages as homeowners can expect to see immediate cost savings with lowered interest. It can however run the risk of increased payments if the central bank decides to increase rates in the future as a large portion of monthly payments goes to interest when rates rise, according to an RBC report.
Penelope Graham, mortgage expert at Ratehub.ca, says the growing narrative that rates will continue to move lower means variable rates can be an attractive option for price-sensitive borrowers.
For homeowners seeking certainty, however, a fixed rate could provide stability. Kennedy said consumers have a choice for what type of mortgage works for them. It depends on risk tolerance.
“I think it really depends on you as an individual or as a family unit, what your risk tolerance is”, said Kennedy. “What I found over the years is that some people want to be able to budget and know for sure what their payments going to be, and they obviously tend to float towards a fixed rate. It’s that debate that’s been going on for probably 20 to 30 years. Do you take that five-year rate, or do you take a floating rate? Which are you better off with after the fact? Some people just feel more comfortable knowing their payments not going to change, and they can budget for that, and go with the fixed rate option. Then there’s some people that don’t mind to have potential movement in the payment from month to month or year to year.”
Global uncertainty, job market weakness hinders market recovery
The interest rate cut comes as Statistics Canada reported an unemployment rate of 7.1 per cent as 66,000 jobs were lost in August, the highest since 2016 outside of the pandemic.
“There’s such uncertainty that I think even if we were to get two more interest rate cuts this year, a lot of families are worried about someone in their family losing a job,” Todd Shyiak, executive vice president of Century 21 told BNNBloomberg.ca in a Wednesday interview. “The lack of new home starts for a myriad of reasons in Vancouver and Toronto caused huge job losses. The tariffs on steel and aluminum caused huge job losses. There’s just such uncertainty, and I think interest rates would normally play a much larger role than they are today, just by virtue of that uncertainty.”
Unemployment figures followed a loss of 41,000 jobs in July, particularly in steel, aluminum and construction sectors. Shiyak said the cut is a step in the right direction and would normally reignite a slow housing market but said there needs to be certainty around U.S. trade policy.
Don Kottick, president of REMAX Canada said the year started well with optimism but a lot of people have been sitting on the sidelines from February to September since the tariffs were announced. He said there is a lot of pent-up buyer demand. He anticipates a healthier market in the fall going into 2026.
“I think with the 25 basis points drop, I do think buyers are probably going to view this as an invitation to start coming back into the market in the major centers,” Kottick said in an interview with BNNBloomberg.ca on Wednesday.
Rate cut to lower borrowing costs for Real Estate Investment Trusts (REITs)
Investors with Canadian Real Estate Investment Trusts (REITS) will see lower borrowing costs for acquisitions and development due to the rate cut. The cut will lower the cost of debt for REITS, supporting expansion and is attractive for investors seeking passive income.
“A quarter-point cut helps bring some relief on borrowing costs for Canadian REITs,” said Kennedy. “It doesn’t change the world overnight, but it does make debt a little cheaper, and that supports confidence in the sector. Investors will still be watching the broader economy, but a small step like this adds stability and signals that financing conditions are improving.”
With files from the Canadian Press and Michael Le Couteur, CTV National News