After the challenges of 2023, 2024 emerged as a year of recovery and progress. The Bank of Canada took decisive action by cutting rates five times, reducing its policy rate from a peak of 5.00% to 3.25%. This brought prime rates—used for pricing variable, adjustable, and line of credit products—down from 7.20% to 5.45%. These cuts provided relief for borrowers, easing financial pressures and giving Canada’s housing market a much-needed boost.

Inflation also showed significant improvement, falling to 2.0% by November, a dramatic drop from its mid-2022 peak of 8.1%. This easing of inflation not only reduced household expenses but also restored a sense of financial stability for many Canadians, making day-to-day budgeting less stressful.

In addition to lower rates and declining inflation, 2024 saw meaningful government and regulatory changes aimed at improving housing affordability. Key measures included increasing the cap for insured mortgages, introducing 30-year amortizations for first-time buyers, and launching federal programs to encourage the development of secondary suites. The foreign buyer ban was adjusted, and new rental builds became eligible for a GST exemption, further incentivizing development. Additionally, the banking regulator removed the stress test for uninsured mortgage switches, making it easier for certain borrowers to qualify for better rates.

These efforts, combined with falling interest rates for both variable and fixed mortgages, reignited activity in the housing market. Lower borrowing costs and renewed consumer confidence encouraged buyers to return, driving a modest rebound in home prices. According to the Canadian Real Estate Association (CREA), national home prices were on track to end 2024 about 0.9% higher than the previous year—a promising sign of recovery after recent market challenges.

Looking Ahead to 2025: Progress on the Horizon

As we move into 2025, the outlook remains cautiously optimistic. Economists expect the Bank of Canada to cut rates further, likely by 25 to 125 basis points, before pausing in the latter half of the year. The timing and extent of these cuts will depend on inflation trends and broader economic conditions, but the overall direction suggests continued relief for borrowers.

The housing market is poised for steady growth, with CREA forecasting a 6.6% rise in national home sales in 2025 as more buyers return to the market. Home prices are also expected to climb by 4.4%, bringing the national average to approximately $713,375 by year-end. These projections reflect a combination of declining interest rates and strong demand, which is expected to keep the market active throughout the year.

Potential additional regulatory changes, such as expanded affordability measures, could further shape market activity. These adjustments may include new programs or incentives to support buyers and address ongoing affordability challenges.