Market update

The Bank of Canada has officially lowered its benchmark interest rate to 2.75%, marking its seventh consecutive cut. While this move is expected to provide some relief for homeowners renewing their mortgages, experts remain skeptical about whether it will truly stimulate homebuying activity in today’s sluggish housing market.

Lower Rates, But Are Buyers Ready?

Historically, lower interest rates have encouraged borrowing and real estate activity. However, experts argue that this latest cut may have limited impact on the market. Mortgage rates are still more than double what they were in 2020 and 2021, when borrowers locked in historically low rates below 2%. Many of those homeowners are now facing significantly higher costs as they renew their mortgages, adding strain to household budgets.

“The impact will be limited,” says Rebecca Oakes, Vice President of Data and Analytics at Equifax Canada. “Many borrowers who locked in at historically low rates are still renewing at significantly higher interest costs, which continues to strain household budgets.”

Uncertainty Keeping Buyers on the Sidelines

Despite the lower rates, homebuyers remain hesitant due to broader economic uncertainty. The ongoing global trade war and rising costs of goods have created a “wait-and-see” approach among both buyers and sellers.

“There is a lot of uncertainty,” explains Samantha Villiard, a regional vice president with Re/Max Canada. “That has prompted households to take a cautious approach.”

Fellow Re/Max VP Kingsley Ma agrees, stating that many would-be homebuyers and sellers are choosing to wait for the economy to stabilize before making any major financial decisions. He adds that a small 25-basis-point rate cut is unlikely to be a deciding factor for buyers.

“If you lose your job, you won’t be able to pay your mortgage—so it doesn’t matter if interest rates are lower,” Ma points out.

Mortgage Renewals & Rising Delinquencies

For homeowners who have renewed their mortgages in the past year, affordability remains a challenge. According to Equifax, Ontario’s mortgage delinquency rate—the percentage of homeowners missing mortgage payments for at least 90 days—nearly doubled in the final quarter of last year, reaching 0.22%. While lower rates may slow the rate of delinquencies, they won’t erase the financial pressures that have built up over time.

Will Fixed-Rate Mortgages Drop?

While variable-rate mortgages tend to move in sync with the Bank of Canada’s benchmark rate, fixed-rate mortgages are tied to government bond yields. Following the latest rate cut, bond yields actually increased, which could limit how much fixed mortgage rates decline.

“This is a key reason why I don’t believe mortgage rates will come down materially enough to eliminate renewal risks,” says Carl Gomez, Chief Economist at CoStar Group. “There was a promise that lower interest rates would reduce mortgage rates—but fixed rates haven’t dropped significantly.”

Housing Affordability Still a Major Challenge

Even with lower borrowing costs, home prices remain out of reach for many Canadians. The average home price in Canada sat at $709,200 in January 2025, according to the Canadian Real Estate Association (CREA). While prices are slightly lower than their peak in 2022, they are still 33% higher than in early 2020, when the Bank of Canada first slashed interest rates to nearly zero.

Gomez stresses that affordability remains a huge barrier, with high mortgage rates making homeownership less accessible for first-time buyers.

What’s Next for the Housing Market?

The latest rate cut is good news for existing homeowners looking to renew their mortgages at slightly lower rates. However, the broader housing market remains in a holding pattern, with economic uncertainty and affordability challenges keeping many buyers and sellers on the sidelines.

Will further rate cuts in 2025 make a bigger impact? That remains to be seen. For now, the housing market is far from a full recovery, and homebuyers will need more than just lower interest rates to regain confidence.

Understanding the BC Home Flipping Tax: What You Need to Know

The real estate market in British Columbia is set to experience a significant shift with the introduction of the BC Home Flipping Tax. This tax, part of the Homes for People Plan, is designed to discourage short-term property flipping for profit. Let’s break down everything you need to know about this new tax, effective January 1, 2025.

What is the BC Home Flipping Tax?

The BC Home Flipping Tax applies to profits earned from selling residential properties or presale contracts in British Columbia if the property is owned for less than 730 days. The tax is governed by the Residential Property (Short-Term Holding) Profit Tax Act and is separate from federal property flipping rules and other income tax systems.

Key Features of the Tax

• Effective Date: January 1, 2025.
• Scope: Applies to residential properties, including housing units and presale contracts.
• Ownership Threshold: Properties sold within 730 days of purchase are subject to the tax unless an exemption applies.
• Tax Rates:
  • 20% on profits for sales within 365 days of purchase.
  • Gradually decreases to zero after 730 days of ownership.

Who is Subject to the Tax?

Any individual, corporation, partnership, or trust selling a taxable property within 730 days of purchase may be subject to the tax. This applies to residents of BC as well as individuals or entities outside the province.

Example 1:

• Property purchased: May 1, 2023.
• Property sold: January 31, 2025.
• Tax applies (642 days of ownership).

Example 2:

• Property purchased: May 1, 2023.
• Property sold: June 1, 2025.
• No tax (762 days of ownership).

What Qualifies as a Taxable Property?

• Residential properties with housing units or those zoned for residential use.
• Rights to acquire residential properties, such as assignments of presale contracts.

Exclusions:

• Leasehold interests or properties in exempt locations.
• Gifts, mortgages, and other transactions that do not involve a transfer of beneficial ownership.

Do You Need to File a Tax Return?

You must file a BC Home Flipping Tax return within 90 days of selling a property if:

• The property is sold within 729 days of purchase and no automatic exemptions apply.
• Your exemption requires filing to be claimed.

You do NOT need to file a return if:

• You owned the property for 730 days or more before selling.
• Your exemption applies automatically.

Exemptions from the Tax

Certain sales may qualify for exemptions, including:

• Transfers between related persons.
• Sales involving primary residences (subject to conditions).

Primary Residence Deduction: If you owned and lived in the property as your primary residence for at least 365 consecutive days, you may deduct up to $20,000 from taxable income.

Example:

• Sam owned and lived in a property for 20 months before selling. Sam qualifies for the deduction.
• Amrita owned and lived in a condo for only 6 months. She does not qualify for the deduction.

How is the Tax Calculated?

The tax applies to the net taxable income from the sale of a property owned for less than 730 days. The rate decreases the longer you own the property, with no tax owed after 730 days.

Days of Ownership Calculation:

• Start counting from the day you purchase the property (typically the closing date).
• End with the day you sell the property (typically the closing date of the sale).

Impact on Presale Contracts and Related Transactions

• For presale contracts, the date of purchase is typically when you enter the contract or pay the deposit.
• Sales between related persons may use the original purchase date of the related seller for tax calculations.

Example 1:

• A developer enters a presale contract on June 1, 2025, for a condo completed on March 1, 2027.
• The ownership date for tax purposes is June 1, 2025.

Example 2:

• Michael buys a property from his father, who originally purchased it in 2020.
• For tax purposes, Michael’s ownership date is deemed to be the father’s purchase date.

Why Does This Matter?

The BC Home Flipping Tax is a critical measure to curb speculative real estate practices and promote housing stability. If you’re considering selling property in BC, understanding these rules is essential to avoid unexpected tax liabilities.

Stay informed and plan your real estate transactions carefully to navigate these new regulations. For more details, consult a tax professional or visit the official government resources.