Two Cuts, One Question: What’s Next for Mortgages & Real Estate?

📊 Rate Watch: Two Cuts, Two Stories: Mortgage Strategy After the BoC & Fed Moves

The big headline: both the Bank of Canada and the US Federal Reserve cut rates by 0.25% last week. As expected, variable mortgage rates in Canada dropped immediately, with most banks’ prime rates now sitting at 4.70%. However, fixed rates remain largely unchanged—they’re influenced more by bond yields than by central bank moves.

So, what does this mean for borrowers right now?

🇨🇦 BoC vs. Fed: Same Move, Different Stories

Although both central banks cut rates, the underlying conditions are quite different. In Canada, the BoC appears to have more room to ease. Our economic data—cooling inflation, soft GDP growth, and weakening labour market—make a strong case for further rate cuts. Market pricing suggests a 50% chance of another BoC cut on October 29.

In contrast, the US Federal Reserve is navigating a more complex path. Core inflation in August rose 0.35% month-over-month, a pace that's giving US policymakers pause. The Fed is expected to move more cautiously, which in turn keeps upward pressure on bond yields.

That matters for Canadians too. When US yields rise, Canadian bond yields often follow—even if our economy is calling for rate relief. This is one of the main reasons fixed mortgage rates in Canada remain sticky, despite rate cuts from the BoC.

🔍 Ron’s Take: Where Rates Might Be Going

There’s a strong probability we’ll see variable rates drop another 25 to 50 basis points over the next six months, possibly bringing prime rates down to 4.20%. For those comfortable with rate risk, this path could offer substantial savings.

Fixed rates, meanwhile, are already sitting near their historical averages. Unless US bond yields retreat, there’s limited room for further declines. Waiting on lower fixed rates might not be worth the gamble—especially with recent volatility in bond markets.

✅ Strategic Advice for Borrowers

If you’re a first-time buyer or prefer predictability, fixed rates remain a solid choice. You lock in today’s cost of borrowing, which is already historically reasonable, and avoid future uncertainty.

However, for borrowers open to short-term risk in exchange for longer-term savings, 5-year variable rates may offer the lowest total cost—provided you have the budget flexibility and understand how future rate movements may impact your payments.

There’s also an important pricing quirk to note: 3-year fixed rates are currently about 20 basis points cheaper than 5-year terms. Unless that gap narrows, 3-year terms present better value, offering flexibility and a potential refinancing opportunity if rates fall further by 2028.

Real Estate Radar: Canadian Rental Market – August 2025 Snapshot

After months of steady decline, are rental prices finally bottoming out? The latest data from Rentals.ca and Urbanation shows a national cooling trend, but Ontario remains under added pressure — especially in key cities and smaller units. Here’s what stood out in August:

🇨🇦 National Rental Market: Downward Streak Continues

• Canadian asking rents fell 2.3% year-over-year in August — the 11th consecutive annual decline, averaging $2,137/month.

• Despite the dip, rents rose 0.8% month-over-month, hinting at a potential bottoming out.

• Studios performed best (+1.1% YoY), while house/townhouse rents dropped 6.0%.

• Purpose-built rentals held up (-0.4% YoY), while condo rents slid 3.7%.

• Saskatchewan and Manitoba were the only provinces with annual rent increases.

🏙️ Ontario: Declines Across Most Unit Types

• Average Ontario rents fell 2.5% annually to $2,330/month.

• One-bedroom units led the drop at -4.9%, now averaging $2,077.

• Three-bedroom units were more stable, down just 0.6% to $3,064.

• Major cities facing rent drops:

  • Vaughan: -9.7%

  • East York: -9.2%

  • Mississauga: -7.2%

  • Brampton, Oshawa, Kitchener: all down over 5%

• Shared accommodation rents in Ontario fell 6.5% YoY to $1,034.

In short: While rents across Canada may be inching toward recovery, Ontario renters and landlords alike are navigating a market that's still finding its footing — especially in urban condo-heavy areas. We'll be watching closely in the months ahead.

🍁 📊 Maple Pulse: Slashed Rates, Stalled Sellers

Rate Cuts Begin, but More Pain Expected Before Relief: The Bank of Canada and U.S. Federal Reserve both delivered long-anticipated 25 bps rate cuts, but the tone was far from celebratory. The BoC’s shift in language — from “resilient” to “slowing,” “soft,” and “weak” — signals growing concern over economic headwinds, despite increased confidence that inflation is easing. Meanwhile, the Fed cited rising employment risks, suggesting a pivot toward job support even as inflation remains above target. Analysts expect more cuts ahead, with both central banks likely to head below 2% by the end of the cycle. (Ron’s take: We’ve covered rate movement in detail in the Rate watch section, but to briefly reiterate: In Canada more rate cuts are expected, but borrowers will do well to remember that fixed rates might not necessarily go down further, and if they do it may not be by too much. The current fixed rates are pretty good and in line with the long term averages. In short - don’t keep waiting for rates to drop before committing to a deal.)

Rate Cuts Spark Renewed Interest in Real Estate and REITs: Following the recent rate cuts by the Bank of Canada and U.S. Federal Reserve, real estate is regaining appeal among investors. Lower borrowing costs are expected to benefit both homeowners and Canadian REITs, which offer exposure to real estate without direct ownership. Analysts highlight seniors’ housing as a high-demand sector, driven by aging demographics. Meanwhile, surging interest in AI is fuelling demand for data centres — a key real estate segment as tech giants pour billions into infrastructure to support digital growth. (Ron’s take: Can confirm directly that real estate activity has picked up. There’s a lot of interest we’re seeing in the market from investors looking to pick up properties at a discount. For any potential buyer, the writing is on the wall - if you’re in the market to buy real estate, this is as good a time as any to get started with the process.)

Immigration Curbs Stall Canada’s Population Growth: Canada’s population growth has nearly flatlined, rising just 0.1% in Q2 — the slowest pace outside pandemic years since 1946. Stricter immigration rules aimed at reducing temporary residents have led to a sharp drop in foreign students and workers, offsetting gains from new arrivals and births. With updated immigration targets due Nov. 1, PM Mark Carney faces pressure to balance public trust with urgent labour shortages in housing and construction. Tepid population growth now joins weak labour data as a drag on economic momentum. (Ron’s take: Well, the govt. is finally fixing, a problem that’s a creation of this govt’s previous form. For the real estate sector, this reduces pressure on purchases but has the downside of labour shortages. For now, we consider it to be a good thing as the immigration numbers over the last few years were unsustainable. Will comment more when the updated immigration targets are released by the govt. later this year.)

Valuation Denial Freezes Canadian Real Estate Market: A reluctance to accept declining property values is stalling real estate transactions across Canada. At the recent RealREIT conference, industry experts noted that sellers are clinging to outdated appraisals, creating a disconnect with buyers factoring in vacancy risks and weaker fundamentals. This “extend and pretend” mindset is limiting liquidity and delaying market recovery. Appraisers say current conditions are hard to price, with reduced immigration and uncertain demand adding complexity — but without pricing realism, deals will remain on ice. (Ron’s take: We’ve said this before. A big reason for the very low number of sales in the real estate market over the last several months is not just buyers being cautious, it’s actually sellers not pricing properties appropriately. The data clearly suggests this. To be fair, this take is even more accurate for commercial real estate as compared to residential real estate. Plenty of realtors subscribe to this newsletter, you know what we’re talking about.)

Hybrid Mortgages: The Middle Path Canadians Keep Ignoring: In Canada’s fixed vs. variable mortgage debate, one option remains underused: the hybrid mortgage. Despite offering a balance of risk — splitting debt between fixed and variable terms — hybrid products are largely ignored, says broker Ron Butler. Canadians prefer simplicity, even if it means being "half wrong" either way. Experts argue that decisions should reflect personal risk, job security, and long-term goals — not just short-term payment relief. As rates fluctuate, diversification in debt, just like investments, may deserve a second look. (Ron’s take: Hybrid mortgages in brief, are a way of splitting a mortgage into fixed and variable rates. They’re being highlighted in the media because of the current situation where it’s a coin toss in deciding between fixed vs variable rates. We’ll do a deep dive into them, listing all the pros and cons - yes, there are several cons, of these mortgages. If you’re interested to know more in the meanwhile, you can always reach out.)

Mortgage Mastery: 📊 Mortgage Math 101: What Are GDS and TDS Ratios?

Before you fall in love with a property, lenders need to fall in love with your numbers. Two of the most important ones? Your GDS and TDS ratios. These financial formulas are the gatekeepers of mortgage approval in Canada — and understanding them puts you one step ahead in your homebuying journey.

Understanding how lenders assess affordability is crucial. Two key calculations used in Canadian mortgage approvals are Gross Debt Service (GDS) and Total Debt Service (TDS) ratios. Here's what they mean and why they matter:

🏠 GDS – Gross Debt Service Ratio

This measures how much of your gross monthly income goes toward housing costs:

• Includes mortgage payments (principal + interest), property taxes, heat, and 50% of condo fees.

• Maximum threshold is typically 39% (may vary by lender). This is for prime lenders, alternate lenders usually exceed these limits.

• Helps lenders ensure buyers can afford the property alone.

💳 TDS – Total Debt Service Ratio

This takes GDS one step further by adding in all other debt payments:

• Includes everything in GDS plus credit cards, car loans, lines of credit, etc.

• Maximum threshold is usually 44%. Again this is limit is for prime lenders, alternate lenders exceed these limits.

• Gives a full picture of financial obligations.

✅ Why These Ratios Matter

• Lenders use them to assess risk and determine how much they’re willing to lend.

• Staying within these limits improves approval chances and protects borrowers from overextending.

Knowing your GDS and TDS ratios isn’t just for mortgage professionals — it’s key to being a confident, informed buyer. By staying within these guidelines, you're not only more likely to get approved but also more likely to sleep soundly in your new home... not stressed about bills.

Memes: 🐦 The Ultimate Rental Strategy

Real estate tip or avian entrepreneurship? Either way, someone’s thinking outside the nest! 😂

Let this be your reminder to stay mindful, stay empathetic, and stay involved — not just when it’s personal, but when it’s right.