2025 Mortgage Rate and Real Estate Predictions
- Edith Parinas
- Jan 22
- 3 min read
As we settle into the new year, it’s time for a fresh look at the trends and opportunities that could shape the mortgage and real estate landscape in the months ahead.
But before diving into this year’s predictions, let’s quickly reflect on how things unfolded in 2024 compared to my expectations.
Looking Back at 2024: How Did My Predictions Fare?
Prediction #1: The Bank of Canada (BoC) Would Reduce Its Policy Rate
I anticipated that the BoC would cut rates significantly in 2024, aiming for a neutral range. While the policy rate did fall to 3.25% by year-end—widely considered the top of the neutral range—the cuts came later than I expected. Half a checkmark for me on this one!
Prediction #2: Variable Rates Would Drop More Dramatically Than Fixed Rates
I predicted variable rates would outperform fixed rates. While both fell—fixed by 1.25% and variable by 1.5–2%—the gap wasn’t as significant as I anticipated. Another half-check here.
Prediction #3: Canadian Real Estate Markets Would Recover Faster Than the U.S.
This prediction didn’t fully pan out in 2024. U.S. home prices ended the year higher than where they started, while Canadian prices finished lower. That said, Canadian home prices gained momentum in the second half of the year, setting the stage for 2025.
Predictions for 2025: What’s Ahead?
Prediction #1: The Bank of Canada Will Lower Its Policy Rate Significantly
The BoC has signaled that it plans to slow the pace of rate cuts, but I believe we’ll see a further 1% reduction, bringing the policy rate to 2.25% or lower. Why?
Economic Pressures: The gap between our economic output and its potential is widening. Lower rates could stimulate demand and help close this gap.
Historical Context: In past rate-cut cycles, the BoC’s policy rate has bottomed out at or below 2%.
For homeowners, this means continued relief for variable-rate borrowers and opportunities to refinance at even lower rates.
Prediction #2: Fixed Mortgage Rates Won’t Fall Much Further
Contrary to popular belief, I expect fixed mortgage rates to remain relatively stable or rise slightly in 2025.
Influence of U.S. Treasury Yields: Canadian bond yields, which determine fixed rates, often mirror U.S. Treasury yields. With U.S. inflation ticking up and government spending surging, American bond yields are likely to rise, pulling Canadian yields with them.
Inverted Yield Curve Normalization: The gap between short- and long-term bond yields will narrow, which could pressure fixed rates upward.
If you’ve been considering locking in a fixed rate, now might be a good time before upward trends solidify.
Prediction #3: Canadian Real Estate Prices Will Continue to Rebound
While Canadian real estate prices dipped in 2024, the market is poised for growth in 2025.
Favorable Mortgage Rates: Lower rates improve affordability, encouraging more buyers to enter the market.
Demand-Supply Imbalance: Canada’s housing shortage remains a persistent driver of price increases. Even with reduced immigration, demand continues to outpace supply.
Savings Boost: Canadian households are sitting on elevated savings—$470 billion more than pre-pandemic levels. These funds are starting to flow back into the market, fueling activity.
Expect continued price gains, particularly in major metro areas, though smaller condo markets may still face challenges.
Mortgage Advice for Early 2025
For Variable Rate Borrowers
If my prediction holds, variable rates will outperform fixed rates in 2025. Additional rate cuts could result in significant savings, making it a great option for borrowers comfortable with some payment fluctuation.
For Fixed Rate Borrowers
Fixed rates have dipped below their long-term averages, making them an appealing option for those prioritizing stability. However, they may not fall much further—so locking in now could be wise.
The Bottom Line
As we enter 2025, the mortgage and real estate market presents exciting opportunities for homeowners, buyers, and investors. Whether you’re considering refinancing, buying your first home, or simply planning your next move, my goal is to help you navigate the landscape with confidence.
Let’s chat about how these predictions impact your personal goals. BOOK A CONSULTATION. Together, we’ll make 2025 the year you achieve your financial and homeownership dreams.
Here’s to a prosperous year ahead!
– Edith Parinas
'The Mortgage Broker ~ The Yogi ~ The Blogger'
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