🏠 Housing Affordability Crisis Update: Are Rate Cuts Enough?

As Canada moves into Fall 2025, housing affordability remains one of the country’s biggest challenges. Despite slowing inflation and the possibility of rate cuts on the horizon, many Canadians are still priced out of the market.

So, will lower interest rates actually help homebuyers — or are the problems much deeper?

📉 1. Affordability Hasn’t Improved Despite Cooling Rates

After years of rising borrowing costs, the Bank of Canada’s gradual rate cuts were expected to bring relief. However, the latest data shows that home prices have stabilized but not fallen significantly.

• Average home price (Sept 2025): $728,000 (down just 2.1% year-over-year)

• Mortgage qualifying rate: Still above 7% due to the stress test

• Typical monthly mortgage payment: Up nearly 35% compared to pre-2020 levels

In short, even modest rate cuts haven’t been enough to offset the damage done by years of high prices.

💰 2. The Real Issue: Supply, Not Just Rates

Economists agree that Canada’s housing supply shortage remains the primary driver of unaffordability. Even as borrowing costs ease, limited housing inventory keeps prices elevated.

Key challenges include:

• Slow housing construction due to high material and labour costs

• Zoning restrictions in major cities

• Population growth outpacing housing supply

Until more homes are built, rate cuts may only fuel demand, pushing prices back up.

📊 3. Impact of Rate Cuts on Homebuyers

For homebuyers, a rate cut of 0.25–0.50% can reduce monthly payments slightly, but not enough to make homeownership widely accessible again.

Example:

• $600,000 mortgage at 5.5% → $3,683/month

• $600,000 mortgage at 5.0% → $3,489/month

That’s only a $194 monthly difference — helpful, but not transformative.

🏗️ 4. Policy Solutions Beyond Interest Rates

Experts suggest that solving the affordability crisis requires bold housing reforms:

✅ Accelerating construction with federal and provincial incentives
✅ Revising zoning laws to allow more multi-family and rental housing
✅ Expanding first-time home buyer support programs
✅ Encouraging purpose-built rentals through tax incentives

Without addressing supply, rate cuts alone won’t fix affordability.

🔍 5. What Buyers Can Do in Late 2025

Even with limited relief, buyers can still take advantage of strategic opportunities:

• Get pre-approved to lock in lower rates before the next BoC decision

• Consider smaller markets or new builds for better value

• Explore government incentives for first-time buyers or green homes

• Work with a mortgage broker (like RateShop) to compare lenders and secure flexible financing options