Is 2025 the Best Time to Buy a Home in Canada (Amid Tariffs!)?

Is 2025 the right time to buy a home in Canada? With uncertainty around interest rates and the newly imposed tariffs from the United States, the potential economic changes coming down the pike are creating uncertainty among home buyers and investors alike. Let’s break down the current prospects for the Canadian housing market in 2025 including the expected interest rate changes, the possible housing shortage and of course, the tariffs.

Is 2025 the Right Time to Buy a Home in Canada?

That’s the million-dollar  question, isn’t it? (Or should we say the million-loonie question?) The policy  rate is currently at 3%, down from 4.50% in mid-2024 and the experts believe that it may go as low as 2.25% by  the end of 2025. This is good news for borrowers!

However, there is one problem  – as the rates decrease, more people tend to enter the market which can lead to price increase.  According to CREA, the average price of a home in Canada is expected to rise by 4.7% to $722,221at the end of the year. This means that although low rates will help you maintain the monthly payment affordability, you could end up paying more for the home overall.  If you’re new to investing and would like a simple step-by-step guide feel free to Download my Free Real Estate Investing Guide here. 

Fixed vs Variable Mortgage Rates in 2025

Here’s where things get interesting. The Bank of Canada has recently cut rates again another 0.25% making variable mortgages more attractive.  Penelope Graham from Ratehub.ca predicts that variable rates will be lower than fixed rates in 2025 but fixed rates also have their advantages, especially for risk averse individuals who want to avoid rate fluctuations so they can sleep well at night.

If  you are a bit of an adventurer, then you can stand to save some money on the rates as  they keep on falling. But if you tend to play the safe side, then a fixed rate might  still be the way to go. And here’s a pro tip: keep an eye on the 3 and 4-year fixed term rates. They’re becoming more popular due to the uncertainty of the market and the ability to renew at the 2.5 and 3.5 year mark respectively. 

Will 2025 Rate Cuts Make Homes More Affordable?

Lower interest rates are always beneficial to the monthly repayment, but this needs to be considered with the fact that the prices of the houses are also likely to increase. The trick is to find the sweet spot – the equilibrium between the lower rates and increasing prices.

First-time buyers, this one’s for you! There are rumors of 30-year amortization schedules, which should help you when trying to qualify for a mortgage. Just make sure to calculate the total interest charged over the life of the loan as it tends to make the overall amount quite a bit more. Pay attention to the amount you are allowed to pre-pay each year and take advantage of that perk to save yourself thousands of dollars.

How Tariffs May Affect Canadian Home Prices

President Trump announced there will be 25% tariffs imposed on Canadian Imports into the United States including but not limited to; food, minerals, building materials and more. Energy products like oil will only see a 10% tariff, but even then it will have a big impact on Canada’s economy. This means construction costs will increase and Canadians will be in for a bit of a price hike to make up for our producer’s lost sales to the United States. Their businesses rely on large sales to make their margins work so Canadians will have to do their part and shop locally to help out. Hopefully this is short lived, but one never knows with Trump in office.

Because of the tariffs, new construction and renovations activities will cost a lot more and therefore we could see a  decrease the supply of homes in certain markets leading to higher prices and fewer choices. 

The  Bottom Line

So, is 2025 the right time to buy a home in Canada? Well, it depends on your particular situation. Lower interest rates are certainly tempting but increasing home prices, compounded by the tariffs will definitely have an effect on our economy. If you need to buy however, once you’ve found a property you like, don’t hesitate. Prices are expected to rise and there could be more competition if/when interest rates decrease.  Also consider the type of mortgage that will work best for you. Variable rates may look good now, but remember that the rates can and probably will rise in the future – especially with the uncertainty caused by the tariffs and other shenanigans brought on by the US. 

Whether you are a first-time homebuyer, an investor, or simply looking to upgrade or downgrade, even though there’s potential for opportunities, proceed with caution due to the uncertainty in the Canadian real estate market in 2025. Be sure to do your homework, work with trusted professionals, and make a decision that lines up with your long-term goals.  As mentioned above, if you’d like to learn more about investing in Real estate you can Download my Free Real Estate Investing Guide here.  All the best in your property search and let’s make the most of this upcoming adventurous year!