The Forecast on Rate Cuts, and Variable Rates Catch up to Fixed Rates

This week’s top real estate stories.

By  Jared Lindzon | 2 minute read

Every Friday, Wahi brings you the most important real estate stories from the past week. 

Renter’s Revenge

Canada’s rental market chart has gone from a hockey stick to a black diamond ski hill. According to Rentals.ca and Urbanation’s latest Rent Report,  asking rents hit an 18-month low in January, averaging $2,100 and representing a 4.4% decline since the first month of 2023. The dip comes after a 38-month run that saw average rents spike from below $1,700 in January 2021 to around $2,200 three years later. The biggest dips were in Ontario, where asking rents declined by 5.2% in the last year, including an 8% drop in Toronto and a 10% plunge in Kingston. 

Economists Searching for the Floor

Economic forecasts aren’t always accurate in the best of times, but with all the uncertainty in the Canadian economy, it’s wise to take today’s models with an entire shaker of salt. That said, a recent Bank of Canada survey of financial institutions found that most anticipate two more 25 bps rate interest rate cuts between now and July, followed by a pause at 2.5% until early 2027. With a potential trade war with the United States on the horizon, however, economists can’t really say for sure where rates go, with some even predicting hikes in the months ahead. 

Variable Rates are Hot, If You Can Take the Heat  

Now is a great time to go for a variable rate, if you have the stomach for it. That’s because after six consecutive interest rate cuts, five-year variable rates are now on par with their fixed-rate equivalent for the first time since November, with even more cuts in the forecast. That’s leading more Canadians to take the more flexible — and risky — borrowing option. That said, with a trade war looming and much uncertainty on the horizon, experts warn that the variable option is not for the faint of heart, who may want to consider a short-term fixed instead.

A Tarrif-ying Housing Market  

U.S. President Donald Trump has rained on the housing market parade just as it was poised for a comeback. Since coming into office, Trump has threatened 25% tariffs on Canadian imports, then offered a 30-day pause, and then went ahead with a 25% tariff on steel and aluminum anyway — and it’s only been one month! Even if the big 25% tariff doesn’t materialize, which is far from certain, Canadians are likely to be living with this threat for the next four years, with significant implications for the housing market stemming from a weaker dollar, a possible recession and deteriorating stock values.

Job Growth, for Now

Canadians got a break from the economic doom and gloom last week after discovering the country added more jobs than expected once again. Last Friday Statistics Canada announced Canada added 76,000 jobs in January, surpassing most forecasts for the third straight month. That’s significant, as experts predict that in a trade war employment overshadows inflation in determining the direction of the economy, the housing market and the Bank of Canada’s rate decisions. “If we weren’t all absorbed with the possibility of a trade war,” according to BMO, “we would be talking about the comeback in the Canadian domestic economy.”    

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