Canada’s housing market has shown signs of recovery, fueled by lower interest rates, new mortgage policies, and growing buyer confidence. The Bank of Canada has cut rates six times, with more reductions expected in 2025, making homeownership more attainable. Meanwhile, higher insured mortgage caps and extended amortizations for first-time buyers create new opportunities. But, as momentum was building, a new challenge emerged—U.S. tariffs, which could disrupt Canada’s economy, impact inflation, and introduce uncertainty into the housing market. With both opportunities and risks ahead, the question is: Will this recovery continue, or will external pressures slow it down?
Optimism Was Building
Several major policy changes were shaping the landscape for homebuyers:
- Lower Interest Rates: The Bank of Canada’s rate cuts improve affordability and bring buyers back into the market. As further cuts occur, mortgage rates could reach their lowest levels in years.
- New Mortgage Rules: The federal government introduced significant changes to insured mortgages, including:
- Higher Insured Mortgage Cap: The limit has increased from $1 million to $1.5 million, allowing more buyers to access insured mortgages and achieve lower down payment amounts.
- Extended Amortizations: First-time buyers and those purchasing newly constructed homes can now opt for 30-year amortizations, making monthly payments more manageable.
- Pent-up Demand: Many prospective buyers put their plans on hold due to high interest rates. Now that rates are dropping and affordability is improving, those buyers are re-entering the market, leading to increased sales activity.
- Supply Constraints: Housing supply remains tight. Limited inventory has been one of the reasons housing prices have remained high and unaffordable for so many.
A Win for Existing Homeowners
In addition to helping first-time buyers, new policies provide relief for existing homeowners. One of the most significant changes was the relaxation of stress test rules at renewal. Previously, homeowners with conventional mortgages had to requalify under the stringent stress test when switching lenders, which often forced them to stay with their existing lender, even if better rates were available elsewhere. The new rules should increase flexibility and competition, helping borrowers secure lower rates at renewal.
The Affordability Question
While these developments were positive, affordability remains a concern. Even with lower mortgage rates, higher mortgage insurance cap, and extended amortizations, high home prices—especially in major cities—continued to put pressure on buyers, particularly first-time buyers who find the cost of living makes it hard to save for the large downpayment needed to buy a home.
New Uncertainty: The Tariff Threat and Its Potential Impact on the Housing Market
While the U.S. tariffs on Canadian imports have been paused for 30 days, the threat remains. The potential for these tariffs to escalate poses significant risks to Canada’s economy, impacting inflation, consumer confidence, and the housing market. If the tariffs were to take effect, particularly the 25% levies on most Canadian imports (excluding energy), Canada could face a serious economic downturn. The country could experience higher unemployment rates, affecting consumer spending, and slow home sales as buyers become more cautious.
As the economy weakens, consumer confidence will dip, making it harder for many Canadians to pursue homeownership. The uncertain job market and inflationary pressures could also limit the Bank of Canada’s ability to continue its streak of rate cuts. While further rate reductions might still be on the table, especially if the economy falters, the rise in costs due to tariffs could keep borrowing costs higher than anticipated. On the other hand, we could see emergency rate cuts should the economy severely falter as job losses mount. We must wait and see what happens.
For the housing market, the fallout from tariffs could lead to fluctuating mortgage rates as financial markets continually adjust to the shifting landscape, so always be sure to get a mortgage preapproval to know how much you qualify for and have your rate locked in for up to 120 days.
But not all news is bleak. The Bank of Canada has already cut interest rates six times, and more cuts are still expected. While the economic outlook remains uncertain, lower rates could still create opportunities for homebuyers, those looking to refinance, or those renewing their mortgage. We’re in a wait-and-see phase, but good planning and expert advice can help you navigate these uncertain waters.
The Road Ahead: Uncertainty Reigns
The Canadian Real Estate Association (CREA) projects a 6.6% rise in home sales for 2025 and an average home price increase of 4.4%. Analysts at TD Economics predict a more moderate price increase of 2–4% by year’s end. While these numbers may not indicate a housing boom, they suggested a steady recovery was underway.
However, the pace and scale of this recovery now depend on the outcome of these tariffs and their impact on the broader economy. Estimates for 2025 may need to be revised, we just aren’t sure yet.
The spring housing market is typically the busiest time of the year, and further Bank of Canada rate cuts are still expected. But, with economic uncertainty looming, buyers and homeowners need to stay informed and flexible in their mortgage planning. If you are waiting for the right time to buy or refinance, let’s chat about your opportunities, potential threats, and the best path forward.
Expert Guidance for Uncertain Times
In times of uncertainty, having the right mortgage expert by your side is more important than ever. Rakhi Madan, Brampton’s #1 rated mortgage broker, has navigated every type of housing and mortgage market over the past 15 years. With over 400 five-star Google reviews and a business built on referrals from satisfied clients and trusted realtor partners, she knows how to find the best solutions—no matter what challenges arise. If you’re planning to buy, renew, or refinance, now is the time to get expert advice from someone who truly understands the Brampton housing and mortgage markets.
