Housing Interest Rate Forecasts

Housing and Interest Rate Forecasts for 2025

As we reflect on 2024, Canada’s housing and mortgage markets demonstrated resilience amidst a challenging economic environment. The Bank of Canada’s pivot to interest rate cuts after two years of hikes provided much-needed relief to borrowers, stabilizing the housing market with moderate gains in home sales and prices across the country.

However, recovery was uneven, with many mortgage holders still grappling with elevated borrowing costs and persistent challenges in housing supply. As we look ahead to 2025, optimism is tempered with caution. Here’s what leading economists and analysts predict for Canada’s housing market and interest rates:

Real Estate Market Outlook

Canadian Real Estate Association (CREA)

• Home Sales Forecast: 499,816 (+6.6% year-over-year)

• Home Price Forecast: $713,375 (+4.4%)

• Commentary: CREA anticipates a gradual improvement in home sales, with a sharper rebound in spring 2025. While the market may remain stable in early 2025, momentum is expected to strengthen by mid-year.

• Source

Royal LePage

• Q4 2025 Home Price Forecast: $856,692 (+6% year-over-year)

• Commentary: A backlog of eager buyers, coupled with changes in mortgage lending rules, will drive demand. The Bank of Canada’s recent rate cuts are expected to boost buyer confidence, with significant activity forecast for late 2025.

• Source

Re/Max

• National Average Price Increase: +5% year-over-year

• Commentary: Re/Max predicts a more active housing market in 2025, with sales increasing in most regions surveyed. Average residential prices are expected to rise, bolstered by easing interest rates.

• Source

RBC Economics

• Home Resales Forecast: 518,400 (+12.5% year-over-year)

• Home Price Forecast by Q4: $809,900 (+1.6%)

• Commentary: RBC expects gradual price appreciation as affordability improves. Further rate cuts are anticipated to encourage buyers sidelined by higher costs.

• Source

TD Economics

• Home Sales Growth: +15.8%

• Home Price Growth: +8%

• Commentary: Falling borrowing costs and sustained economic growth are expected to propel the market forward. Changes to mortgage rules implemented in late 2024 will further enhance demand.

• Source

Interest Rate Forecasts

The Bank of Canada’s rate cuts in 2024, totaling 175 basis points, set the stage for continued easing in 2025. Economists predict a cautious approach, with the overnight rate likely falling to between 2.00% and 3.00% by mid-2025, depending on inflation and economic performance.

Fixed Mortgage Rates

Bond yields, which heavily influence fixed mortgage rates, are expected to remain steady, hovering around 3.00%. This stability will likely provide predictability for fixed-rate mortgage borrowers.

Variable Mortgage Rates

Variable-rate loans should see further reductions as the central bank continues to ease monetary policy. Borrowers can expect incremental relief throughout 2025.

Key Takeaways

1. Modest Market Growth: Housing sales and prices are forecast to increase, driven by improved borrowing conditions and renewed buyer confidence.

2. Rate Relief: Continued rate cuts will offer relief, but affordability challenges remain, particularly in high-demand urban markets.

3. Policy Impacts: Changes to mortgage lending rules are expected to enhance affordability and stimulate demand.

Here are the latest interest rate and bond yield forecasts from the Big 6 banks, with any changes from their previous forecasts in parenthesis:

While 2025 holds promise for Canada’s housing market, ongoing supply constraints and affordability issues will remain focal points for policymakers, buyers, and sellers alike. As the market evolves, staying informed will be key to navigating opportunities and challenges in the year ahead.

Conclusion

The Canadian housing market in 2025 offers a cautiously optimistic outlook, with growth anticipated in sales and home prices driven by lower interest rates and renewed buyer confidence. However, affordability and supply constraints will continue to shape market dynamics. As your trusted real estate professional, I am here to provide insights and guidance tailored to your needs. For personalized advice and expert market knowledge in Edmonton’s real estate landscape, contact Nooran Ostadeian at RE/MAX Elite.

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