Lower Rates ≠ Relief (Yet)
Affordability is the buzzword in Canadian real estate.
But just because the Bank of Canada pauses—or even cuts—its policy rate doesn’t mean buyers suddenly feel flush with purchasing power.
In this post, we’ll break down what’s really going on behind the scenes of Toronto’s “affordability” conversation—and what you need to know as a buyer or seller.
Rates Are Flat or Falling… So Why Is It Still So Hard?
- Prices are down 2.5% from last year
- Fixed mortgage rates increased again in July 2025
- Pre-approvals are coming in lower due to tighter lender stress tests
Even if buyers can technically qualify, they’re not confident. They’re pausing offers. Showings are up – offers are flat.
The Psychology of Affordability
It’s not just the math—it’s the mindset.
Buyers today are:
- Hesitant to lock in at high rates
- Expecting better “deals” around the corner
- Unsure how long jobs and income will remain stable
And that hesitation stalls deals—even when properties are reasonably priced.
Bond Yields vs. Bank of Canada: Why It Matters
Here’s the part most people miss:
- Variable mortgage rates are tied to the Bank of Canada
- Fixed rates follow bond yields—which have been trending up
So even if the BoC holds or cuts, lenders may still raise their fixed-rate products.
Buyers hear “rates are dropping!”—but find their lender has actually raised rates that same week.
What to Do As a Buyer or Seller in 2025
Buyers:
→ Lock in pre-approvals now. Even a 30-day window can help.
→ Focus on monthly payment comfort—not just price.
→ Understand fixed vs variable pros/cons based on your timeline.
Sellers:
→ Be ready for longer decision timelines.
→ Price sharply to encourage movement.
→ Don’t assume a “rate cut” headline means demand will spike.
Affordability Needs More Than Lower Rates
Until rate cuts are matched with consumer confidence, and sustained affordability – Toronto buyers will remain cautious. And that’s something sellers need to factor in if they want to close.
