The current easing cycle, coupled with the economy’s resilience, has helped stabilize the housing market, with home sales and prices rising slightly across the country.
However, the road to recovery will not be easy. While interest rate cuts have eased pressure, many borrowers, particularly those renewing their mortgages, continue to feel the pinch of rising borrowing costs. Meanwhile, housing supply challenges remain, making affordability a top concern for policymakers and buyers.
Entering 2025, the outlook is cautiously optimistic, but uncertainties still exist. Here’s what economists and analysts expect for the housing market and interest rates in the year ahead:
real estate market
Canadian Real Estate Association (CREA)
- 2025 home sales forecast: 499,816 units (6.6% annual increase)
- “…sales conditions have shifted from a gradual improvement to an expectation that the market will remain stable until next spring, when a larger rebound is expected. The result is a slight downward revision of sales for this year and next, but from the second quarter of 2025 To start, the momentum may be stronger.
- 2025 house price forecast: $713,375 (+4.4%)
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royal estate
- Home price forecast for the fourth quarter of 2025: $856,692 (6% annual increase)
- Comment: “After several years of unusual volatility in the housing market, key indicators point to a return to stability in 2025. The backlog of willing and able buyers continues to grow, and upcoming mortgage rule changes will further enhance Canadians’ Lending Capacity Phil Soper, president and CEO of Royal LePage, said: “The most notable thing is that it will take some time for the Bank of Canada to shift from an ‘inflation fighter’ to an ‘economic booster’ to affect buyer behavior. After the Bank of Canada cut interest rates by 50 basis points. Finally, we saw a significant increase in market activity in early Q4 as buyers now believe home prices have bottomed out and are eager to take action before competition intensifies.
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re/max
- National average price increase in 2025: +5% year-on-year
- Comment: “Canadians are optimistic about the outlook for the housing market in 2025, driven by a series of interest rate cuts in the second half of 2024. RE/MAX Canada and its network of brokers and agents expect the market to be more active next year, with the national average home price likely to Sales rose 5%, and sales in 33 of the 37 regions surveyed are expected to rise, with sales growth as high as 25%.
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Royal Bank of Canada Economics
- 2025 home resale forecast: 518,400 units (12.5% annual increase)
- Comment: “We expect (recent) sales growth to continue in the coming months, but at a more controlled pace. The prospect of further interest rate cuts may entice more buyers to wait and see, but serious affordability issues will limit entry to the market. Flow of people.
- Q4 2025 Home Price Forecast: $809,900 (+1.6%)
- Comment: “We continue to believe that any price increases will be gradual until interest rate cuts next year restore ownership affordability more significantly.”
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Daoming Economics
- Home sales growth forecast for 2025: +15.8%
- House price growth forecast for 2025: +8%
- Comment: “Gradually falling borrowing costs and continued economic growth should support positive sales growth in 2025. Mortgage rule changes implemented in December will also boost demand and prices. However, given the upgrade in starting points, we now see sales reached (and exceeded) pre-pandemic levels in the fourth quarter of 2024.
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2025 Interest Rate Forecast
Looking ahead to 2025, the Bank of Canada is expected to cut interest rates at a slower pace. After five consecutive cuts to easing policy totaling 175 basis points (1.75 percentage points) in 2024, the central bank is expected to take a more cautious, meeting-by-meeting approach guided by incoming economic data.
Overnight rates are expected to fall further from 3.25% by mid-2025, possibly stabilizing between 2.00% and 3.00%, depending on the trajectory of inflation and economic conditions.
Bond yields play an important role in setting fixed mortgage rates and are expected to remain relatively stable at current levels around 3.00%.
For borrowers, this means interest rate relief will continue, but at a slower pace. Over time, variable rate loans should shrink further, while fixed rate mortgages are likely to become more predictable.
Here are the latest interest rate and bond yield forecasts from the six major banks, with any changes from previous forecasts in brackets.
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2025 Bank of Canada interest rate forecast Six major banks Big bank forecast Bond yield forecast Bond yield forecast Real estate market Real estate market outlook Interest rate forecast Interest rate Royal Bank of Canada Economic RE/MAX Royal LePage TD Economic
Last modified: December 30, 2024
