Does the Bank of Canada's cut in its policy rate affect property prices?

The answer is yes… and no.

The decrease in the policy rate has a limited direct effect on monthly mortgage payments, but it acts as a psychological and economic trigger that can influence property prices through indirect mechanisms.

Direct impact: a modest monthly saving

When the Bank of Canada lowers its policy rate, only variable-rate mortgages see their rate adjust immediately. Fixed-rate loans, on the other hand, depend more on bond markets and banks' internal strategies.

For example, at the most recent announcement of September 17, 2025, the Bank of Canada cut its policy rate by 0.25%, bringing it to 2.50%.

On a mortgage of $500,000, a drop of 0.25% equates to about $77 in monthly savings. A small welcome relief, but it does not drastically change a family budget.

Indirect factors that really influence property prices

It is mainly indirectly that rate changes can move the real estate market. Three major factors come into play:

1. The pool of qualified buyers increases

Each decrease in the policy rate slightly reduces borrowing costs and improves the debt-to-income ratios required to obtain a mortgage. Some buyers who were previously excluded become eligible again.

Result: more buyers in the market leads to an increase in demand and, often, upward pressure on prices.

2. The psychological and social effect

Even if the rate cut yields only a small tangible financial gain, the announcement creates a sense of urgency. Many potential buyers fear that prices will rise or that rates will go up later.

This phenomenon fuels multiple offers, especially in markets that are already competitive.

3. The financing cost for investors and developers

The rate cuts reduce the cost of financing for real estate investors and developers. This can :

• Encourage some to buy rental properties or income-generating buildings,
• Promote the launch of new residential projects,
• Support the value of land and existing buildings.

When investors find it easier to finance themselves, overall demand for properties also increases.

In summary

The decrease in the policy rate does not instantly raise home prices through a simple adjustment to monthly payments. But it reignites demand, attracts new buyers, stimulates investment, and sometimes fuels competition among buyers.

👉 Consequence: prices may rise, especially if property inventory remains limited.