Residential Market Commentary - BoC cuts rate amid mixed economic news

People hunting for homes and mortgages have had a lot of economic and market news coming their way lately.  Probably the most significant is the Bank of Canada’s decision to lower its policy rate.

As expected, the central bank trimmed a quarter of a point off its trendsetting interest rate, bring it to 2.50%.  It is the first rate move since March.

The cut came a day after Statistics Canada reported the inflation rate rose to 1.9% in August, up from 1.7% in July.

Normally rising inflation would be a reason for the Bank not to lower its rate, due to concerns about over stimulating the economy and encouraging even more inflation.  However, the Bank noted that other factors – such as stable (although higher than desired) core inflation, a decline in the gross domestic product and an increase in unemployment – indicate inflation is not a high risk.

The interest rate cut could make variable-rate mortgages look more attractive for those who are comfortable with potential rate movement.

The Canadian Real Estate Association reports August home sales increased 1.1% compared to July and were almost 2.0% better than a year earlier.  The MLS Home Price Index showed flat pricing month-over-month, but registered a 3.4% decline year-over-year.  CREA’s national average price was $664,000 in August 2025, up 1.8% from August 2024.

August new listings were up 2.6% over July and up 8.8% over a year earlier.