Canadian Interest Rates June 2025: What Buyers, Sellers & Investors Should Expect
- Startritehomes
- Jun 18
- 4 min read
As of June 2025, the Bank of Canada (BoC) has held its overnight rate at 2.75%, pausing after a single cut earlier this year. With inflation proving more persistent than expected and geopolitical tensions—particularly U.S. trade tariffs—weighing on forecasts, Canadians are searching for clarity: Where are interest rates headed?
From first-time buyers to seasoned investors, understanding the direction of interest rates is critical in navigating mortgages, property pricing, and long-term strategies. This blog provides a comprehensive breakdown of verified expert forecasts, recent BoC decisions, and what’s ahead for Canadian real estate.
Bank of Canada Holds—But Hints at Cuts Ahead
On June 5, 2025, the Bank of Canada confirmed its decision to hold the policy rate at 2.75%, citing caution due to sticky core inflation and economic uncertainties.
“Underlying inflationary pressures could persist for an extended period,” said Deputy Governor Toni Gravelle. “We need clearer evidence that disinflation is taking hold.”(Bank of Canada statement, reported by Reuters, June 17, 2025)
While core inflation has edged down to 2.3%, it remains above the BoC’s 2% target, particularly due to shelter costs and service-sector inflation. At the same time, economic growth is slowing—GDP rose just 2.2% in Q1, and labour markets are showing early signs of softening.
What the Experts Are Predicting
Two Rate Cuts Likely in 2025
Most major financial institutions and economists forecast two additional quarter-point cuts in 2025, potentially reducing the overnight rate to 2.25% by December.
“We still expect two 25-basis-point cuts this year as inflation cools and economic slack increases,”— TD Economics, June 2025 Outlook
“Labour softness and declining consumer momentum support further easing. Expect gradual cuts through Q3 and Q4.”— RSM Canada, June 2025 Economic Forecast
“The BoC may already be at the bottom of its rate cycle unless inflation slows meaningfully in the next quarter.”— RBC Economics, June 10, 2025
Market-Implied Probabilities (WOWA.ca, June 15, 2025):
Date | Expected Rate | Probability |
July 30, 2025 | 2.50% | ~67% |
December 2025 | 2.25% | ~96% |
These figures reflect bond market expectations and derivatives pricing, both of which are strong indicators of investor confidence in further easing.
What’s Driving the BoC’s Decisions?
Persistent Core Inflation
Core CPI is holding at 2.3%, driven by shelter costs and services, despite easing goods inflation.
The BoC is particularly focused on “sticky” inflation in wages and services.
Global Risk: U.S. Tariffs
New U.S. trade tariffs, especially on Canadian steel and aluminum, are adding uncertainty and inflationary pressure.
The BoC must balance monetary easing with the risk of tariff-induced inflation.
Economic Slowdown
While Canada’s GDP grew at 2.2% in Q1, domestic consumption is declining, and unemployment is rising in Alberta, Ontario, and Atlantic Canada.
Housing activity has slowed sharply in Toronto, Calgary, and Winnipeg in early 2025, reducing inflationary housing pressure.
How Interest Rate Trends Affect Buyers, Sellers & Investors
For Buyers: Affordability Is Improving—Slowly
While interest rates remain above pre-pandemic levels, mortgage rates are beginning to ease. Fixed rates are slightly down from 2024 highs, and further BoC cuts would push variable rates lower by fall 2025.
Mortgage Type | Typical Rate (June 2025) | Outlook |
Variable | 5.40% – 5.60% | Could fall to ~5.00% by Q4 |
1–2 Year Fixed | 5.20% – 5.40% | Strong short-term option |
5-Year Fixed | 4.85% – 5.10% | Good for long-term stability |
(Source: Ratehub.ca, June 18, 2025)
Pro Tip: Buyers may consider short-term fixed-rate mortgages (1–3 years) to time further cuts without long-term commitment.
For Sellers: Buyer Demand May Rebound in Fall
Many homeowners are waiting to list until rates fall further. A 50-basis-point reduction could spur more buyers back into the market by fall—especially in the $400K–$700K range.
“If rates fall to 2.25%, it could fuel a more active fall market,” says John Pasalis, Realosophy Realty. (Toronto Star, June 16, 2025)
For Investors: Stabilizing Costs, Renewed Activity
Investors are monitoring BoC trends closely. As rates ease, cap rates in mid-tier residential, industrial, and alternative asset classes (data centers, storage, healthcare facilities) are beginning to compress again.
“We’re seeing capital re-enter multi-res and industrial sectors as financing becomes less restrictive,”— PwC Canada, Emerging Trends in Real Estate 2025
Rental demand remains strong—especially in Alberta, Saskatchewan, and Atlantic Canada—where interprovincial migration is highest.
Long-Term Outlook – Is This the New Normal?
Most experts agree that rates will not return to the near-zero era of the 2010s. A “neutral” interest rate of 2%–3% is the new BoC baseline for a balanced economy. Future increases or cuts will depend on global trade stability, federal fiscal policy, and housing affordability strategies.
The Bottom Line for Canadians
Current BoC Rate: 2.75%
Expected Year-End Rate: 2.25%
Next Key Date: July 30, 2025 – Potential 25bp rate cut
Whether you’re entering the market or holding investments, interest rates remain one of the most important levers for Canadian real estate. In 2025, interest rates in Canada are expected to decline gradually, with a likely year-end target of 2.25%—but buyers and investors should not confuse easing rates with automatic affordability. The Bank of Canada remains cautious, and so should you.
Lower rates may improve monthly payments, but qualifying for the best mortgage rates still depends on strong credit, steady income, and low debt ratios. Most lenders in 2025 continue to apply the mortgage stress test, meaning borrowers must prove they can afford payments at the contract rate plus 2%, or the Bank of Canada's benchmark rate (currently 5.25%), whichever is higher. Interest rates may be falling—but qualifying can still be a climb. Plan accordingly, and work with professionals who understand the evolving lending landscape.
Comentários