Bank of Canada Cuts Rate to 2.25% — What It Means for Homebuyers and the GTA Housing Market

Bank of Canada Cuts Rate to 2.25% — But Signals the End of Its Easing Cycle

Published October 29, 2025
By Maria Homes | Real Estate Insights for the GTA

The Bank of Canada made headlines again this week after cutting its benchmark interest rate by 0.25% to 2.25%, marking the fourth rate cut this year. But despite this latest move, the central bank hinted that this could be the last cut for a while — suggesting that the period of rate relief for Canadians may be coming to an end.

Why the Bank of Canada Cut Rates Again

This latest cut was largely expected. The Bank’s Governing Council cited a weakening economic outlook, slowing growth, and contained inflation as the main reasons for easing. According to Governor Tiff Macklem, the goal is to keep inflation close to 2% while helping the economy adjust to ongoing trade challenges and slower population growth.

However, Mr. Macklem was clear: if the economy follows the bank’s latest forecast, interest rates are now “at about the right level.” That means Canadians shouldn’t expect another rate drop anytime soon.

The U.S. Tariff Impact: A Major Headwind

One of the biggest factors weighing on Canada’s economy is the impact of U.S. tariffs. Since returning to office in January, President Donald Trump has implemented a series of protectionist measures targeting Canadian exports — from steel and aluminum to autos and forest products.

As a result, the average U.S. tariff on Canadian goods has surged from just 0.1% to nearly 6% this year. The Bank of Canada estimates that these trade barriers will leave Canada’s GDP about 1.5 percentage points smaller by the end of next year than it would have been otherwise.

In simple terms, these tariffs are hurting Canadian businesses, limiting exports, and dampening job growth — even in sectors not directly hit by tariffs.

“The weakness we’re seeing in the Canadian economy is more than a cyclical downturn. It’s a structural transition,” said Macklem. “Monetary policy cannot undo the damage caused by tariffs.”

A Slower Economic Outlook Ahead

According to the Bank’s latest Monetary Policy Report, GDP growth is expected to remain sluggish:

• +0.75% in the second half of this year (after a 1.6% drop in Q2)

• +1.1% in 2026

• +1.6% in 2027

This weaker growth is being compounded by reduced population growth, tied to the federal government’s new, lower immigration targets.

Meanwhile, business investment and hiring remain soft, as uncertainty around trade continues to weigh on corporate confidence.

Inflation Near 2%, But Easing

On the inflation side, there’s some good news: consumer prices are stabilizing. The Consumer Price Index (CPI) rose 2.4% in September, while core inflation hovered around 3%, near the top of the Bank’s target range.

However, Macklem noted that the upward momentum in inflation has “dissipated.” The Bank now expects inflationary pressures to ease, keeping CPI inflation near 2% over the coming year.

Why the Bank May Pause Further Cuts

With inflation under control and the economy showing signs of structural weakness, the Bank of Canada is taking a cautious stance. Even though 2.25% is at the lower end of what’s considered a “neutral rate,” further cuts could risk overstimulating inflation without meaningfully boosting growth.

Put simply, monetary policy can’t fix structural issues caused by trade disruptions — it can only cushion the impact.

“Increased trade friction means our economy will work less efficiently, with higher costs and less income,” Macklem said.

What This Means for Homebuyers and Homeowners

For homeowners and real estate investors, the Bank’s latest move offers modest short-term relief — but also signals stability ahead.

Here’s what to expect:

• Variable mortgage rates may edge slightly lower following the rate cut.

• Fixed mortgage rates could remain steady, as bond yields may not move much with the Bank signaling a pause.

• Buyer confidence may improve modestly, especially for those waiting for the bottom of rate cuts.

• Sellers, however, should remain realistic — with slower economic growth and trade headwinds, demand recovery could remain gradual.

If this truly marks the end of the easing cycle, we may be entering a period of rate stability, rather than ongoing declines — which could help balance the housing market heading into 2026.

Government Spending Could Play a Bigger Role

With the Bank of Canada nearing the limits of what it can do, attention is now turning to fiscal policy. Prime Minister Mark Carney is set to release his first budget next week, which is expected to feature deficit spending focused on infrastructure, defence, and housing — potentially providing a new boost to the economy.

Final Thoughts

The 2.25% policy rate reflects an economy in transition — one facing global trade challenges, slower growth, and a cautious central bank walking a fine line between stimulus and stability.

For the real estate market, this could mean a period of predictable borrowing costs and a more balanced environment between buyers and sellers.

As always, staying informed about interest rate trends helps you make smarter real estate decisions — whether you’re buying your first condo or selling your family home.

?? Thinking about buying or selling this season?
Let’s talk about how these rate changes impact your mortgage options and property value.
Call or TEXT Maria Ho at 416-858-9006 for the latest GTA market updates and expert insights.