Lower rates fuel investor interest in REITs and variable mortgages, but economic uncertainty persists
A sharp drop in borrowing costs is set to ripple through Canada’s real estate and investment landscape, following the Bank of Canada’s decision to cut its key lending rate to 2.25 percent—a move that is already drawing strong reactions from market leaders and experts.
According to BNN Bloomberg, real estate professionals have welcomed the rate cut, viewing it as a timely signal of support from the central bank amid persistent economic headwinds.
Karim Kennedy, CEO of Coldwell Banker Canada, described the move as “a great step,” highlighting that it comes against a backdrop of weak GDP growth, higher-than-desired unemployment, and unpredictable US trade disruptions.
Kennedy expects pent-up demand in the housing market to be unleashed, potentially leading to a rebound in the fourth quarter of 2025.
However, the optimism is tempered by ongoing concerns over inflation, tariffs, and affordability.
Bank governor Tiff Macklem acknowledged that US tariffs and trade uncertainty have weakened the Canadian economy and increased costs for many businesses, putting upward pressure on inflation, as reported by BNN Bloomberg.
For investors, the rate cut brings both opportunity and caution.
Borrowing costs for Canadian Real Estate Investment Trusts (REITS) are expected to decrease, making it easier to finance property acquisitions and development.
Keith Reading, senior director of research at Morguard, told BNN Bloomberg that REITS are now seen as a defensive asset, well-positioned to weather economic turbulence.
Bronwyn Smith, CEO of RealServus, noted that variable mortgages are becoming more attractive, and expects increased interest if further rate cuts follow.
Yet, as per CBC News, the broader business outlook remains subdued.
Simon Gaudreault, chief economist at the Canadian Federation of Independent Business, pointed out that despite lower rates, businesses face ongoing challenges such as labour shortages and rising operating costs.
Many are holding back on new investments and hiring, preferring to maintain liquidity in the face of uncertainty.
On the personal finance front, the rate cut offers immediate relief to homeowners with variable-rate mortgages, whose payments will decrease as rates fall.
Prospective buyers may also be incentivized to enter the market, with Penelope Graham of RateHub.ca noting that lower rates often spur a psychological shift and increased activity in the housing sector, as reported by CBC News.
Ultimately, the Bank of Canada’s decision is more than a technical adjustment; it is a signal to Canadians about the direction of the economy.
As Andrew DiCapua, principal economist at the Canadian Chamber of Commerce, explained to CBC News, such moves influence public confidence and can shape both consumer and business decision-making for months to come.
