The Bank of Canada (BoC) cut its interest rate by 25 basis points, lowering it from 2.50% to 2.25%. This marks the central bank’s second consecutive rate cut, following the same reduction in September.

“With ongoing weakness in the economy and inflation expected to remain close to the 2% target, Governing Council decided to cut the policy rate by 25 basis points,” the bank announced on October 29. “If inflation and economic activity evolve broadly in line with the October projection, Governing Council sees the current policy rate at about the right level to keep inflation close to 2% while helping the economy through this period of structural adjustment. If the outlook changes, we are prepared to respond.”

This latest rate cut has stirred commentary within the real estate and homebuilding sectors, reflecting both concern and optimism about the cut’s impact on new housing and future homebuyers.

Concerns for housing industry

Leor Margulies, partner of the commercial real estate and development group at Robins Appleby LLP., believes the central bank is underestimating the severity of the current downturn in the new home sector and is urging more decisive action.

“The BOC is finally waking up to the fact the economy is in serious trouble,” he says. “It does recognize the challenges the Canadian economy is facing, but it still seems to be soft selling the problems in not recognizing the terrible impact of the uncertainty from the tariffs on industries as a whole, and the huge downturn in the new home market in Canada.”

He points to the Greater Toronto Area’s new condo sales numbers for September. They total 155 units, representing a level that is 90 per cent below the 10-year average.

“From all accounts this real estate recession is even worse than the 90 – 95 recession which I thought could not be worse having lived and suffered throughout,” he adds. “The low-rise side in GTA and elsewhere is not substantially better.”

Margulies warns that this continued weakness underscores the urgent need for more aggressive rate cuts to help the new home market recover.

“What it has not factored in is the coming downturn in the construction industry next year when all of the existing projects are substantially done and there is nothing in the pipeline, either on the low-rise or the hi-rise side,” he predicts. “The residential construction industry is one of the top five or 6 industries in Canada and when it shuts down, as it will next year and following, the impact will be severe.”

He adds that the half-point rate cut coupled with newly announced tax breaks for first-time homebuyers could boost the market, but the BOC’s caution is holding it back.

Potential confidence booster

Meanwhile, Ross McCredie, CEO and Chairman of Sutton Group, described the cut as beneficial, although it hasn’t translated to cheaper mortgages.

“While the September inflation numbers created some uncertainty, the latest rate cut was both expected and welcome,” he says. “However, it’s important to note that the recent rate cuts haven’t significantly impacted many Canadians’ mortgage rates. That said, this move may help restore some confidence for buyers who have been waiting on the sidelines, which is particularly important given the stagnating market conditions across Canada.”

Rishard Rameez, CEO and Co-Founder of Zown, suggests something similar. Although affordability hasn’t yet improved, the rate cut sends a message to first-time buyers that the cycle is turning. “Confidence tends to return before affordability does, and that shift in sentiment can gradually thaw activity in what’s been a frozen segment of the market,” he says. “The key question now is whether optimism can hold if prices start rising faster than incomes through the next year.”

Echoing this sentiment, James Innis, president of Sutton Group, notes that the Bank of Canada’s fourth rate cut this year extends the current easing cycle, providing ongoing support for homeowners while addressing tariff uncertainties, affordability challenges, and inflation concerns.

“For the roughly 1.8 million Canadian households facing upcoming mortgage renewals in the next twelve months or those contemplating their first home purchase, this easing helps restore confidence and improve affordability,” he notes. “Still, as the nine cuts over the cycle have shown, monetary policy alone cannot solve Canada’s housing challenges. Meaningful progress for Canadians will depend on coordinated action from all levels of government to expand supply, support homeowners and improve affordability.”