The Bank of Canada pressed pause on interest rates this week, opting to hold its benchmark overnight lending rate at 2.75% amid heightened economic uncertainty. This decision on April 16, 2025 breaks a streak of seven consecutive rate cuts, as policymakers assess the fallout of an escalating trade dispute with the United States. With borrowing costs now holding steady, many are asking how this will affect Canada’s cooling real estate market specially in hotspots like the Greater Toronto Area (GTA). Below, we unpack the central bank’s rationale and explore the implications for housing across Canada, the GTA in particular, and for those looking to buy, sell, or invest in property.
BoC Decision: No Change!
No Change at 2.75%: The Bank of Canada (BoC) announced it is keeping the overnight interest rate at 2.75%. This marks an end to a series of rate cuts that began last year as the economy showed signs of strain. Analysts had been split on what the Bank would do this week some expected another 0.25% rate cut, while others predicted a pause. In the end, the BoC chose caution, opting for status quo on rates.
Why Hold Rates? The central bank’s decision is heavily influenced by uncertainty stemming from a U.S.-Canada trade conflict. In recent weeks, U.S. President Donald Trump intensified a tariff “trade war” with Canada, introducing tariffs that threaten to raise costs for consumers and businesses. The BoC noted that this “unpredictability of tariffs” has “increased uncertainty, diminished prospects for economic growth, and raised inflation expectations”. In other words, trade tensions are a double-edged sword: they slow economic growth while also pushing prices higher, making the outlook murky for monetary policy.
Economic Signals: Canada’s economy has been showing mixed signals. On one hand, inflation has eased – the annual consumer price index cooled to 2.3% in March from 2.6% in February, which is near the BoC’s 2% target. On the other hand, growth is faltering: consumer spending, housing investment, and business investment all weakened in the first quarter. The labor market is also softening employment declined in March and wage growth has moderated. BoC Governor Tiff Macklem explained the rate hold by saying, “At this meeting, we decided to hold our policy rate unchanged as we gain more information about both the path forward for U.S. tariffs and their impacts”.
Two Paths Forward: Governor Macklem sketched out two possible scenarios for the economy. In a best-case scenario, most new tariffs get negotiated away, causing only a short stall in growth (with GDP flat in Q2) and allowing inflation to dip below 2% in 2025. The worst-case scenario is a “long-lasting global trade war” – Canada would slide into a year-long recession, GDP would contract, and inflation could rise above 3% by mid-2026. Given this high-stakes uncertainty, the Bank is effectively in wait-and-see mode.
Figure: Greater Toronto Area average home price trend (all property types). After peaking in early 2022 during the pandemic boom, GTA home prices declined through 2022, stabilized in 2023, and remain roughly 15% below the peak. As of March 2025, the average home price is around $1.09 million, slightly down year-over-year amid higher interest rates and increased supply.
Cooling Canadian Housing Market Outlook
Higher interest rates over the past year had already cooled Canada’s housing market, and the added tariff turmoil is reinforcing that chill. New data from the Canadian Real Estate Association (CREA) shows that home sales across Canada fell sharply this spring. In March 2025, national home resale volumes were down 9.3% compared to a year earlier. Prices have pulled back as well. The average home price in Canada was $678,331 in March 2025, a 3.7% decline from March 2024. CREA predicts the national average price will edge down 0.3% this year.
Confidence Shaken: The sudden trade war shock is a big reason for this U-turn in housing momentum. Would-be buyers who were initially spooked by talk of tariffs are now also facing the tangible effects – like slower job growth and shakier confidence which could keep them on the sidelines.
Regional Differences: Not all parts of Canada are equally affected. The slowdown has been most pronounced in Ontario and British Columbia, where affordability was already stretched. CREA expects average prices in Ontario and B.C. to see small declines in 2025. In contrast, Quebec and Atlantic Canada and the Prairies are holding up better, with some cities like Quebec City and St. John’s still showing year-over-year gains.
Mortgage Rates Easing: Fixed mortgage rates have come down from their peaks. Many lenders are now offering 5-year fixed mortgages at around 3.7% and variable rates around 4.0%. The average 5-year conventional mortgage rate is about 5.3%, down from 6.15% a year ago. Despite improvements, affordability remains a major challenge.
GTA Housing Market: More Supply, Calmer Prices
In the Greater Toronto Area (GTA), the market is experiencing a noticeable cooldown.
Sales volumes have dropped, while new listings have surged, tilting the market in favor of buyers. However, prices have only edged down slightly, with sellers generally holding firm. The average GTA home price in March was $1.093 million, down 2.5% year-over-year.
Detached homes remain the most expensive (average ~$1.72M in Toronto), while condos are showing some signs of resilience due to their relative affordability.
What Does It Mean for Sellers, Buyers, and Investors?
Sellers: Be realistic with pricing, and prepare for longer selling timelines. With more listings and fewer buyers, it’s important to work with an experienced agent who understands current market dynamics.
Buyers: Benefit from less competition, more listings, and slightly improved affordability. But economic uncertainty means staying within budget and locking in rate holds is wise.
Investors: Financing costs remain high, but rental demand is strong. Look for buy-and-hold opportunities, focus on cash flow, and prepare for long-term gains if you purchase strategically during this lull.
Conclusion: Cautious Spring, Brighter Horizons?
The rate hold offers short-term relief but reflects serious uncertainty. Real estate markets, especially in the GTA, are cooler and more balanced. While the spring season may remain quiet, expectations for modest growth in late 2025 and 2026 remain if trade tensions ease and the BoC resumes rate cuts. The long-term fundamentals of immigration-driven demand and limited supply support a slow recovery.
Sources:
Bank of Canada Rate Announcement (Global News)
CREA March 2025 Housing Data
TRREB GTA Market Update
RBC Economics Housing Market Commentary
NerdWallet Canada Affordability Insights
Ratehub.ca Mortgage Rate Trends
Zoocasa GTA Market Analysis
Reuters and BNN Bloomberg Economic Coverage
