Relief for Borrowers, But Confidence Still Lags
For variable-rate mortgage holders, the cut is tangible. Many clients who were paying in the mid-sixes not long ago are now comfortably in the mid-threes. Lines of credit, floating-rate business loans, and adjustable mortgages are all slightly cheaper.
Jason Friesen put it plainly: “This is good news for most variable-rate clients. Carrying costs have improved, and affordability should stabilize.”
But the data show something interesting. Even as affordability improves, buyer confidence remains muted. According to TRREB, transaction volumes are roughly half of what they were at the market’s 2021 peak. The math works, but psychology does not.
Fox Marin sees this every day. “People can buy,” Fox explained. “They are just choosing not to. Confidence, not affordability, is the constraint.”
Why This Is Not the 1990s All Over Again
Every time rates fall, comparisons to the early 1990s downturn resurface. The parallels are superficial at best.
Back then, borrowing costs exceeded 18 percent. Today, even after years of tightening, the overnight rate is a fraction of what it was. Mortgage arrears remain extremely low at 0.23 percent compared to 10 perfect during the U.S. subprime crisis. Households also hold far more equity than in past cycles.
Friesen added another key distinction: “Banks are more collaborative today. Since 2020, they have shown real willingness to work with borrowers before pushing anyone into power of sale.”
In other words, while the headlines may sound familiar, the fundamentals are entirely different. Canada’s mortgage system is healthier, its underwriting is stronger, and its major banks are aligned with government policy to prevent systemic distress.
What Two Rate Cuts Tell Us About the Economy
A double cut in quick succession sends a clear message. The Bank of Canada is concerned about the economy’s momentum. GDP growth is weak, job creation is slowing, and household debt remains elevated.
Unemployment now sits above seven percent nationally and nearly nine percent in Toronto, the highest in a decade outside the pandemic. Power-of-sale listings are ticking up, and consumer credit delinquencies are rising.
Fox believes this is only the beginning. “We are entering an era where the effects of automation, tariffs, and AI are colliding,” he said. “The Bank’s new concern is not inflation, it is structural unemployment. That is why they will keep cutting.”
If the data continue to trend this way, further reductions in early 2026 appear inevitable. Fox Marin projects the overnight rate could settle under two percent, creating a stimulative environment next spring.
The Neutral Rate Explained
Friesen describes today’s 2.25 perfect policy rate as roughly “neutral,” meaning it neither stimulates nor restrains growth. To spark activity, the Bank will likely need to cut further.
This “neutral zone” is critical for real estate professionals and investors to understand. It is the point where monetary policy stops being restrictive and starts encouraging borrowing again. Once confidence aligns with lower rates, pent-up demand could re-enter the market quickly.
Why Affordability Feels the Same, Even When Rates Drop
One of the most surprising insights from Fox Marin’s analysis is that affordability today is almost identical to 2022, despite a 25 percent drop in prices.
How? Because while prices fell, borrowing costs rose. The latest rate cuts are beginning to narrow that gap, but psychology matters more than spreadsheets. Until buyers believe the worst is behind them, many will stay on the sidelines.
In 2021, Toronto recorded 127,000 MLS transactions. This year, it may not reach 60,000, the lowest in nearly a quarter-century. Yet population has soared, and housing supply remains constrained. The setup for a rebound exists; it simply is a question of how long until we see the bottom.
Where Buyers and Sellers Go From here
For buyers, the takeaway is clear. Patience is an asset, but paralysis is not. The best opportunities tend to emerge when confidence is low and rates are trending down.
Fox Marin encourages clients to focus on fundamentals such as location, design, natural light, and long-term livability rather than trying to time the bottom. “There is no perfect entry point,” Fox said. “There is only the right decision, made with the right information.”
For sellers, the message is equally strategic. With inventory building and buyers cautious, precision matters. Homes must be priced intelligently, marketed professionally, and presented flawlessly to stand out. Fox Marin’s design-forward, data-driven approach ensures listings connect emotionally while still aligning with current analytics.
Variable Versus Fixed: The New Decision Framework
When rates are falling, the natural temptation is to go variable. Friesen advises caution. “A variable rate makes sense for some clients, but not everyone,” he said. “The question is not which product is cheapest; it is which one lets you sleep at night.”
Most buyers today are opting for shorter-term fixed-rate mortgages, two- or three-year terms, that balance stability with flexibility. This allows them to capture lower rates sooner if the easing cycle continues through 2026.
Fox Marin reinforces the same philosophy: risk management before rate chasing. Every financial decision should fit the client’s timeline, temperament, and goals.
Banks Are Competing Differently
Another under-reported shift is the banking landscape itself. According to the recent CMHC data, refinance approvals have dropped from 90 percent in 2020 to 70 perfect today, and purchase approvals from 70 percent to 62 percent.
Despite tighter criteria, banks are aggressively defending their existing client base. “Renewals are priced more competitively than new business,” Friesen explained. “Retention is the new growth.”
This competition benefits borrowers who stay organized and negotiate proactively, something Fox Marin and its lending partners help clients navigate every day.
Looking Ahead: What Comes After the Cuts
If the Bank continues to ease in 2026, the key question becomes whether confidence will return quickly enough to meet demand.
With unemployment trending higher and government budgets tightening, the rebound may not be immediate. But the ingredients are forming: a lower-rate environment, substantial immigration, and persistent housing shortages. When sentiment shifts, momentum can build quickly.
Fox sums it up best: “There is no sure thing in 2025, but intelligence will always outperform speculation. Rate cuts help, but strategy wins.”
Conclusions: Reading Between the Lines
The Bank of Canada’s back-to-back rate reductions mark a turning point, not just for borrowers but for the psychology of the market. Lower rates will gradually rebuild confidence.
In that respect, Fox Marin’s role is not to predict the future; it is to prepare clients for it. Through disciplined analysis, design-driven marketing, and a deep understanding of how monetary policy intersects with local housing dynamics, Fox Marin continues to set the standard for professional real estate advisory in Toronto.
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(*Source: Jan. 1, 2018 – Sept 1, 2025, RE Stats Inc. & Exclusive)
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This article was written by Ralph Fox, Broker of Record and Managing Partner here at Fox Marin Associates. Ralph is a Torontonian native who recognized from an early age that the most successful people in life apply long-term thinking to their investments, relationships, and life goals. It’s this philosophy, along with his lifelong entrepreneurial drive and exceptional business instincts, that help to establish Ralph as a top agent in the real estate market in downtown Toronto.
