The Bank of Canada has trimmed the nation’s overnight interest rate by 25 BPS to 2.75 per cent, offering an additional incentive for aspiring homebuyers during the busy spring season, while also emphasizing its anxiety over a trade war with the U.S.

The seventh consecutive reduction since June 2024, it reflects decades-high inflation being brought down to a target range, Canada's economy growing faster than expected in 2024, and the bank's attempt to cushion the blow from ever-changing tariffs from the U.S.

For example, after announcing 50 per cent tariffs on Canadian steel and aluminum, the U.S. lowered it to 25 per cent after the Ontario government suspended retaliatory 25 per cent tariffs on electricity it sells to its southern neighbour. The U.S. has also pushed back a 25 per cent tariff on all Canadian goods - by a month.

"The trade conflict with the United States can be expected to weigh on economic activity, while also increasing prices and inflation," Tiff Macklem, governor of the Bank of Canada, said in an announcement. Surveys conducted by the central bank have showed the impact is already being felt by Canadian businesses and in consumer intentions.

Such a back-and-forth threatens both economies and continues to further shake up the construction and housing sectors.

While the uncertainty will impact many sectors of the housing market, for those in a position to buy this might actually be a good time, according to one senior industry insider.

“In an increasingly turbulent economic environment, this series of rate decreases presents an opening to aspiring homebuyers and those approaching their mortgage renewal,” Phil Soper, president and CEO of Royal LePage, said in a statement sent to RENX Homes. “While ongoing trade tensions will sow hesitancy in the minds of some consumers, purchasers who are motivated to transact this spring are well-positioned to use their enhanced borrowing power to their advantage, in a market with more inventory to choose from."

U.S. tariffs and Canada's housing sector

Uncertainty is taking its toll on Canadian housing developers and investors, who are struggling to finalize projects. An additional strain would come from counter-tariffs, which could raise the cost of imported construction materials from the U.S. such as plywood, glass and plumbing components. The move would increase construction costs, likely hindering the building of housing.

Tariffs “will lead to a further slowdown in residential construction activity and exacerbate our already dire housing affordability crisis,” Richard Lyall, president of the Residential Construction Council of Ontario, said in a release.

The trade barriers compound Canada’s already limited housing supply, which is a major contributor to the high costs in the country's biggest cities.

But there are bright spots in the country’s housing market despite the unpredictability and persistent problems of cost and supply. Re/Max’s 2025 Canadian Housing Market Report forecast the housing sales market will move toward recovery, with particular optimism for buyers.

The Greater Toronto Area market had been showing early signs of momentum as spring approaches, Debbie Cosic, founder and CEO of Toronto-based In2ition Realty, said in an email to RENX Homes. But the question remains whether the rate cut will provide further momentum.

"(The rate cut) underscores the ongoing economic uncertainty and the central bank’s need for caution. With the loonie remaining fragile and lingering confusion over tariffs, this ‘pause and play’ scenario continues to create unease in the markets," she wrote. "At the same time, Canada’s political landscape is shifting.

"A new Liberal leader is in place, and with Mark Carney taking on a greater role in shaping economic policy, there is growing focus on how the government will address housing, inflation, and economic growth. Their response will be key in determining market confidence moving forward.

What's next for Bank of Canada 

When asked about the possibility of an interest rate hike or a recession in light of the tariffs, Macklem and senior deputy governor Carolyn Rogers said the bank could not provide guidance or a forecast in the current business and political climate.

Monetary policy cannot offset the impacts of a trade war, Macklem explained, but the central bank can “ensure that any rise in inflation is temporary,” by helping the economy adjust to tariffs.

The Bank of Canada will assess upward pressure on inflation from new costs and downward pressure on inflation from weaker demand; and forecast inflation expectations in the medium- and long-term.

“We’re going to be assessing these things carefully. That’s going to take some time. Our message really is that we will proceed carefully with any further changes to our policy rate,” Macklem said during a media briefing following the announcement.

EDITOR'S NOTE: RENX Homes will continue updating this breaking article with additional commentary and insights as it becomes available.