In a widely expected move, the Bank of Canada implemented its sixth consecutive interest rate cut yesterday, bringing its benchmark rate to 3% – down from its peak of 5%.

This move is largely priced into the market, meaning it’s already factored into expectations. Although the tax cuts have helped bring down headline inflation, core inflation has been ticking upward over the past three months, which suggests inflation could edge higher in the coming months. This could prompt the BoC to take a more measured approach to rate cuts moving forward.

That said, the potential for a tariff dispute with the U.S. could offset some of the positive impacts of a rate reduction on Canadian households. However, even with that risk, a full-blown housing market collapse seems unlikely, as Canadians’ FOMO (fear of missing out) on real estate opportunities is still a powerful driver in the market.

At the same time, competition among lenders is fierce, so those looking to buy or renew their mortgages should definitely shop around for the best deal. Meanwhile, inflation rates saw a significant drop to 1.9% in December, which is below the BoC’s target of 2%. This, combined with the previous series of rate hikes, suggests that interest rates may continue to ease throughout 2025.