Canadians have been waiting for the moment the housing market “takes off again.”Rates are finally edging down.Inflation is cooling.The Bank of Canada has turned the corner.

So… why isn’t the real estate market booming?

If you’ve been watching the numbers and wondering why things still feel slow, you’re not alone. The reality is this: lower interest rates don’t automatically create more buyers. In 2025, several powerful forces are holding the market back — even though rates are improving.

Let’s break it down in simple, data-backed terms.

1. Affordability Is Still Extremely Tight — Even With Lower Rates

Yes, interest rates have come down from peak levels.But affordability hasn’t meaningfully recovered.

Here’s why:

• Home prices in many regions remain high relative to income.

• Even a 0.25%–0.50% rate cut doesn’t reduce monthly payments enough for many new buyers.

• Everyday costs — groceries, utilities, insurance — are still elevated and squeezing budgets.

Consumers don’t feel richer yet. Meaning fewer are willing to stretch into a major purchase.

2. The Stress Test Is Still a Major Barrier

Even with lower rates, buyers must still qualify at contract rate + 2%.

Example: A 4.19% mortgage still requires qualifying at 6.19%.

That qualification rate hasn’t moved much at all — and for many Canadians, that’s the real roadblock, not just the posted rate.

Until OSFI adjusts the stress test or rates drop substantially, buying power will remain restricted.

3. The Mortgage Renewal Wave Is Creating Household Caution

The Bank of Canada estimates that more than 60% of mortgages are up for renewal between 2025 and 2026.

Many renewals will face increases — sometimes 10%–25% depending on their previous rate.

This creates three effects:

1. Households prioritize stability over buying/selling

2. Existing owners become more conservative and avoid taking on bigger mortgages

3. Many stay put and ride out their renewal

In other words: renewal anxiety dampens market activity.

4. Inventory Is Rising in Several Major Markets

More listings are coming onto the market in cities like Toronto, Calgary, Edmonton, and Ottawa.

When buyers see more choice, they feel less pressure.

Fewer bidding wars.

More conditional offers.

More time to decide.

This softens price growth and removes that “spring frenzy” feeling people expect when rates drop.

5. Immigration Growth Has Slowed vs. 2021–2023 Levels

Newcomers are a huge driver of rental and ownership demand.

Recent policy shifts — including caps on temporary residents — have cooled this growth slightly. Supply has increased at the same time. The net result?

Demand isn’t accelerating at the pace many predicted.

This keeps the market more balanced.

6. Canadians Are Expecting Bigger Rate Cuts — So They’re Waiting

Consumer confidence surveys show that Canadians believe:

• Rates will keep dropping

• Prices will cool further

• Better deals are ahead

This “wait-and-see” psychology slows today’s market activity.

Why buy now if you think prices or payments will be lower in six months?

7. Debt Levels Are Reducing Borrowing Power

Canada still has one of the highest household debt-to-income ratios in the world.

High debt = lower mortgage qualification.

Even with lower rates, many families simply can’t borrow as much as before — which limits how far prices can rise in the short term.

8. Wage Growth Hasn’t Kept Pace With Qualification Requirements

Wages are improving, but not fast enough to:

• Keep up with home price increases

• Overcome the stress test

• Counter inflation in other parts of life

This keeps many would-be buyers on the sidelines a bit longer.

So… When Will the Market Pick Up?

The early signs of recovery usually happen when these three things align:

1. Rates drop to a point where payments noticeably change affordability

2. Consumer confidence improves — people feel financially secure again

3. Renewal pressure eases and supply stabilizes

   
   

We’re not there yet, but we’re moving in that direction.

Rate cuts will accumulate.

Renewals will normalize.

Wage growth and population trends will rebalance.

When those factors converge, real estate activity typically ramps up quickly — sometimes faster than buyers expect.

Swivel’s Take: What You Should Do Right Now

Whether the market is heating up or cooling down, smart planning wins. Here’s what we recommend based on today’s conditions:

If you’re buying:

Start planning early — even small rate drops can shift qualifying power.

Watch inventory trends in your city.

If you’re renewing:

Get pre-approved for renewal options 6–12 months ahead.

You may have more leverage than you think.

If you’re selling:

Position your home competitively in a market with more listings.

If you’re waiting for the market to change:

Stay informed — markets can turn quickly when confidence returns.

Thinking About Your Next Move?

We translate market trends into clear, personalized strategies tailored to your situation — not headlines.

Whether you're buying, renewing, or planning ahead, we can help you make the most informed decision during this transition period.

Book a quick strategy call with Swivel Mortgage Group — clarity starts with a conversation.