Among an uncertain market with pressure from U.S. trade tariffs, The Bank of Canada has lowered its overnight rate target to 2.75%. The Bank Rate is now 3%, and the deposit rate is 2.70%.

What does this mean for buyers?

Uncertainty is scary. With many buyers sitting on the sidelines, buyers can aim for negotiating better deals in a less competitive market. For buyers who want to secure higher preapprovals, the lower interest rate improves mortgage affordability. If it was difficult to get financing for your dream home in the last year, it’s a great time to try again!

What does this mean for sellers?

Selling is still possible - especially with a REALTOR® who knows how to navigate the market. With built up buyer anticipation from 2024, many buyers are still in the market for the right home. While offers are less likely to enter multiple offer situations, buyers are more likely to secure financing and put strong offers. If you’re thinking of selling, price your property sharply and get as much exposure for your home to get the best buyers.

As Canada started 2025, the economy was in a strong position, with inflation close to the 2% target and good GDP growth. However, ongoing trade tensions and tariffs from the United States are expected to slow economic activity and push inflation up in Canada. The economic outlook is more uncertain than usual due to the quickly changing policies.

In the fourth quarter of 2024, Canada’s economy grew by 2.6%, following a revised growth rate of 2.2% in the third quarter. This growth is stronger than expected in January’s economic report. Previous interest rate cuts have helped boost the economy, especially consumer spending and housing. However, economic growth is expected to slow in early 2025 due to the escalating trade conflict. Recent surveys show that consumer confidence has dropped sharply, and businesses are slowing down their spending, with many delaying or canceling investments.

Although the economy has been growing better than expected, the uncertainty caused by the US tariff threats is making consumers hesitant to spend and businesses reluctant to hire or invest. With inflation still close to the 2% target, the Bank’s Governing Council decided to cut the policy rate by another 25 basis points.

While monetary policy can’t fix the impacts of a trade war, it aims to prevent price increases from leading to continued inflation. The Governing Council will carefully monitor the balance between downward pressure on inflation from a slower economy and upward pressure from rising costs.

The next scheduled interest rate update is April 16, 2025.