The current easing cycle, combined with a resilient economy, helped stabilize the housing market, with modest gains in home sales and prices across the country.

However, the road to recovery has been uneven. While rate cuts provided relief, many borrowers, particularly those renewing their mortgages, continued to feel the pinch of higher borrowing costs. At the same time, housing supply challenges persisted, keeping affordability front and centre for policymakers and buyers alike.

As we enter 2025, the outlook is cautiously optimistic, but uncertainties remain. Here’s a closer look at what economists and analysts expect for the housing market and interest rates in the year ahead:

Real Estate Market

The Canadian Real Estate Association (CREA)

• 2025 home sales forecast: 499,816 (+6.6% year-over-year)
  • “…the profile for sales from one of a gradual improvement has changed to one whereby the market is forecast to remain in more of a holding pattern until next spring, when a sharper rebound is expected. The result is a slight downward revision to sales this year and next, but with the potential for much stronger momentum beginning in the second quarter of 2025.”
• 2025 home price forecast: $713,375 (+4.4%)
• Source

Royal LePage

• 2025 house price forecast by Q4: $856,692 (+6% year-over-year)
  • Commentary: “After several years of unusual volatility in the real estate market, key indicators point to a return to stability in 2025. The backlog of willing and able buyers continues to grow, and upcoming changes to mortgage lending rules will further enhance Canadians’ borrowing power,” said Royal LePage President and CEO Phil Soper. “Most notably, the Bank of Canada’s shift from ‘inflation fighter’ to ‘economy booster’ has taken time to influence buyer behaviour. We saw a marked increase in market activity at the start of the fourth quarter, following the Bank of Canada’s 50-basis-point rate cut. Buyers now believe home prices have hit bottom and are eager to act before competition intensifies.”
• Source

Re/Max

• 2025 national average price increase: +5% year-over-year
  • Commentary: “Canadians are looking ahead to 2025 with a positive outlook on the housing market, prompted by a series of interest rate cuts in the latter part of 2024. RE/MAX Canada and its network of brokers and agents are expecting a more active market next year, with the national average residential price likely to increase by five per cent, and sales anticipated to rise in 33 out of 37 regions surveyed, with sales increases of up to 25%.”
• Source

RBC Economics

• 2025 home resales forecast: 518,400 (+12.5% year-over-year)
  • Commentary: “We expect the (recent) upswing (in sales) will continue in the months ahead, but at a measured pace. The prospects for further rate cuts will likely draw more buyers from the sidelines, but significant affordability issues will restrain the flow of those entering the market.”
• 2025 home price forecast by Q4: $809,900 (+1.6%)
  • Commentary: “We continue to believe that any price appreciation will be gradual until interest rate cuts restore ownership affordability more significantly next year.”
• Source

TD Economics

• 2025 home sales growth forecast: +15.8%
• 2025 home price growth forecast: +8%
  • Commentary: “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 to the starting point we now see sales reaching (and surpassing) their pre-pandemic level in 2024Q4.”
• Source

2025 interest rate forecasts

As we look ahead to 2025, Bank of Canada rate cuts are expected to slow down. Following five consecutive cuts totalling 175 basis points (1.75 percentage points) of easing in 2024, the central bank is expected to take a more cautious, meeting-by-meeting approach, guided by incoming economic data.

By mid-2025, the overnight rate is expected to decline further from 3.25%, likely settling between 2.00% and 3.00%, depending on the trajectory of inflation and economic conditions.

Bond yields, which play a big role in setting fixed mortgage rates, are expected to stay relatively steady from their current level of around 3.00%.

For borrowers, this means rate relief will continue, but at a slower pace. Variable-rate loans should see further reductions, and fixed-rate mortgages will likely become more predictable as the year goes on.

Below are the latest interest rate and bond yield forecasts from the Big 6 banks, with any changes from their previous forecasts in parenthesis.

	Current Policy Rate:	Policy Rate: Q4 ’25	Policy Rate: Q4 ’26	5-Year Bond Yield: Q4 ’24	5-Year Bond Yield: Q4 ‘25	5-Year Bond Yield: Q4 ‘26
	3.25%	2.50%		2.95% (-10bps)	2.75% (+15bps)
	3.25%	2.25%	2.25%	NA	NA	NA
	3.25%	2.25% (+25bps)	2.75%	2.90%	2.50% (+20bps)	2.85%
	3.25%	2.00%		2.85% (-10bps)	2.45%
	3.25%	3.00%		2.90% (-10bps)	3.50% (-25bps)	3.50%
	3.25%	2.25%	2.25%	2.90% (-15bps)	2.75%	2.75%

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Last modified: January 7, 2025