How Interest Rates Are Impacting Calgary’s Housing Market 2025

After five consecutive interest rate cuts by the Bank of Canada between September 2024 and March 2025, the BoC held the current rate at 2.75% in both April and June. While speculation remains high in anticipation of two additional rate cuts before the year’s out, the BoC will need to manage day-to-day affordability for Canadians against burgeoning inflation and global influences. Whether you’re buying or selling, understanding how these changes affect affordability and strategy is key. Rob and Kim are here to help you navigate these changes and make confident decisions – after all timing is everything.

Impact on Buyers

Buyer affordability refers to how much home a person can afford to buy, usually measured by the monthly mortgage payment they can afford. Interest rates have a direct impact on this:

1. Higher Interest Rates = Higher Monthly Payments

When rates rise, the cost of borrowing increases, which raises monthly mortgage payments and reduces the loan amount a buyer can afford forcing consumers into smaller properties or less desired neighbourhoods.

2. Lower Interest Rates = Lower Monthly Payments 

Even a small reduction in rates can significantly decrease mortgage costs, making homeownership more accessible to a wider range of buyers. Increased buying power allows buyers to get more from their budgets allowing them to afford larger and / or better quality properties.

3. Timing

Securing a home with manageable interest payments will allow buyers to build     equity sooner and position themselves for long-term financial growth.

Impact on Sellers 

Lower interest rates tend to have a positive impact on sellers as well as buyers.

1. Increased Buyer Demand 

Lower borrowing costs mean MORE buyers can qualify for a mortgage. As more buyers enter the market competition increases leading to quicker offers.

2. Higher Home Prices

Often buyers are able to push their budget when they have a lower interest rate. 

So when more buyers are competing for the same property, the sale price tends to rise as the buyer’s rate affordability increases. 

 3. Shorter Period on Market

Sellers benefit from a property in high demand by selling more quickly and face a lesser risk of reducing their list price or becoming stale on the market.

4. A Potential Drawback: More Competition Among Sellers

As rates drop and buyer demand rises, more homeowners may decide to list their property, increasing inventory. In some markets, this could offset price gains.   

Adjusting Selling Strategies

Homes that provide strong value—like those in affordable neighborhoods or with appealing features—are likely to attract more attention. Sellers should focus on showcasing these aspects effectively.

Understanding the balance between buyer affordability and market demand is imperative when setting a competitive yet realistic price. Pricing your home strategically will attract more qualified buyers and increase the chances of a successful sale.

Navigating the Market

• For Buyers: Securing pre-approval and adjusting your search to match your updated budget will be key to finding the right home in this environment.
• For Sellers: Strategic pricing and focusing on the home’s value propositions will be crucial for a successful sale.
  

Ready to Navigate Calgary’s Housing Market in 2025?
Contact Rob and Kim today to learn more about how rising interest rates are impacting the market and how to make informed decisions in today’s changing real estate environment.