Interest Rate Adjustments
On January 29, 2025, the Bank of Canada reduced its target for the overnight rate by 25 basis points, bringing it down to 3%. This marks the sixth rate cut within the past year, totaling a 2% decrease from the peak of 5%. The policy rate now resides within the "neutral range" of 2.25% to 3.25%, a zone where rates neither stimulate nor restrain economic growth.
This reduction has led to a slight decline in mortgage rates. As of February 2025, five-year fixed mortgage rates are in the low to mid-4% range, approximately 0.25% lower than variable rates, which are in the mid to high 4% range.
Balanced Market Indicators
The sales-to-active listings ratio currently stands at 14%, suggesting a balanced market where supply aligns with demand. Single-family homes exhibit a ratio of 9.2%, leaning towards a buyer's market, while townhouses and condominiums show more robust activity yet remain balanced. The MLS benchmark price across all home types in Greater Vancouver has seen a modest 0.5% increase from January 2024, now at $1,173,000.
Economic Outlook
Economists anticipate that the Bank of Canada may implement two additional 25 basis point rate cuts in 2025, potentially lowering the policy rate to 2.5% by mid-year. However, external factors, such as ongoing U.S. tariffs on Canadian imports, could influence these projections. While mortgage rates have slightly eased, they remain elevated, and housing affordability challenges persist, especially with the significant influx of immigrants increasing housing demand.