Good Morning

📌 In Today’s issue:

• Current inflation dynamics in Canada

• The latest moves by the Bank of Canada (BoC) and interest‐rate expectations

• How this interplay affects housing affordability, financing and market behaviour

• What to expect heading into Q4 2025 and beyond

• RealEdge action‐steps for buyers, sellers and investors

Want a Free CMA of your property → Click Here

Inflation dynamics: Where we are and what it means

• Canada’s headline inflation rate climbed to 2.4 % year-over-year in September 2025, up from ~1.9 % in August. This rise was driven by smaller declines in gasoline prices and a sharper increase in food costs.

• The BoC’s preferred core inflation measures (CPI-Trim, CPI-Median) remain around 3.0 %–3.2 %, signalling underlying price pressures are not yet fully resolved.

• Though headline inflation remains within the BoC’s target range (1-3 %), the persistence of core inflation means the Bank remains cautious.

Interest rate policy & expectations

On September 17, 2025, the BoC cut its policy rate by 25 basis points (bps) to 2.50 %, phrasing the move as “prepared to ease further if risks rise.”

• Market pricing in late October assigns 86-90 % probability to another 25 bps cut in the October 29 meeting.

• However, fixed mortgage rates may remain elevated: one forecast shows 5-year conventional fixed rates rising toward ~5.2 % in early 2026 even if the policy rate drops.

Translation for housing:
Variable-rate mortgage holders stand to benefit relatively quickly if cuts happen. Fixed-rate borrowers—and new buyers locking in—face a tougher navigation: even with policy rate relief, the bond markets and risk premium may keep fixed rates higher than historical norms.

How this affects housing: Affordability, financing & market behaviour

Affordability and financing

• Rate cuts reduce carrying cost, but fixed‐rate mortgages react slowly (via bond yields + risk spreads). For many buyers, the financing maths still look tight.

• Renewal risk remains strong: households who locked in ultra-low fixed rates 2020–21 are now facing higher rates and higher payments.

• Investors underwriting new purchases must assume higher cost of capital and slower growth in values.

Market behaviour

• Buyers may feel a “relief bump” in sentiment, but with affordability constraints still real, demand may improve only modestly.

• Sellers in high-price markets may have to anchor expectations to flat or modestly up price movement rather than assuming rapid increases.

• Markets with better affordability or tighter supply may benefit from improved dynamics (but are not immune to external cost/inflation pressures).

What to expect: Q4 2025 and beyond

RealEdge action-steps

Buyers:

• Do not assume “rates will fall a lot.” Build in buffer.

• Stick to properties with strong fundamentals (location, condition, potential).

• Explore variable or shorter-fixed term if confident rates will drop—but account for risk.

Sellers:

• Price with awareness of slower growth environment.

• Emphasize value drivers (low maintenance, energy efficiency, transit access).

• If in a high-price market, consider listing earlier rather than waiting for a “boom” that may not happen.

Investors:

• Underwrite assuming higher cost of capital and slower capital appreciation.

• Focus on cash-flow assets, value-add opportunities, or secondary markets where margin is higher.

• Monitor renewal risk in your portfolio—properties with big payment jumps are more vulnerable to tenant turnover, higher vacancy, or owner sale.

RealEdge bottom line

Inflation remains tame but sticky. The BoC’s rate cuts are helping, but not dramatically so. Mortgage costs (especially fixed-rate) remain elevated compared to the low-rate era. The housing market is in transition: improved affordability and supply relief are helping, but we’re not yet at full recovery or boom. For the remainder of 2025: expect steady, not spectacular activity, with key differentiation by market segment and geography.

Want a 10-minute micro-brief on any of these markets (with comps and rent grids)? Book a quick strategy

Stay tuned for next week

See you next week