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Just in—The Bank of Canada (BoC) has cut its target rate by 25 basis points, marking the first rate cut of 2025. So far, rates have dropped by 200 basis points from the peak, bringing the target rate to 3%. While this move was widely expected, the real question is: What’s next?
With potential U.S. tariffs looming, things could get unpredictable. Let’s break it all down and, if you want to chat about how this impacts your Toronto real estate investments, book a call with us!

What the BoC Rate Cut Means
In today’s announcement, the Bank of Canada signaled a shift to a wait-and-see approach moving forward. Inflation appears under control for now, and Canada’s economy is weak—but the biggest wildcard is the United States, making future moves uncertain.
Economists are split on what happens next:
- Bank of America believes the BoC won’t cut rates further in 2025, expecting the economy to recover on its own, partly due to a stronger-than-expected December jobs report.
- Canadian economists think otherwise. Many expect at least two more rate cuts this year, bringing the target rate down to 2.5% by the end of 2025.
However, all predictions could go out the window if U.S. tariffs come into play.

How U.S. Tariffs Could Shake Things Up
The U.S. has threatened to impose 25% tariffs on Canadian goods starting February 1st, which could severely impact our economy. According to an older BoC monetary policy report, a 25% tariff could lead to a 6% drop in Canada’s GDP.
To put that in perspective: During severe recessions, GDP typically declines by 2-4%, so a 6% drop would be massive. If that happens, the Bank of Canada may be forced to cut rates aggressively to offset the economic damage.
Our dollar is already weak at $0.69 USD, and if tariffs go through, it could fall to $0.64 USD. That would make imports more expensive, driving inflation back up—which would put the BoC in an even tougher spot.
The central bank is now juggling three major challenges at once:
- Controlling inflation
- Supporting the economy
- Preventing the Canadian dollar from crashing further
If Canada retaliates with its own tariffs, inflation could rise even more, making the BoC’s decisions even harder.

How This Affects Toronto Real Estate
With interest rates fluctuating, Toronto’s real estate market will likely stay soft. But overall, we expect more stability compared to the past few years. This predictability should help keep property values more stable.
- Fixed mortgage rates are around 4%
- Variable rates are expected to drop closer to 4%
On the rental side, lower immigration and a weaker economy could push rents down further. Here’s a rough estimate:
- For every 25 bps rate cut, rents could fall by 2.5%.
- If we get three 25 bps cuts in 2025, rents might drop 5-10%—but cash flows should remain stable due to lower mortgage payments.
Key Takeaways for Real Estate Investors
- It’s not the time to bet on property prices. Market stability is improving, but don’t expect rapid appreciation.
- Focus on strong cash flow properties. Multiplexes outperform condos and single-family homes when it comes to rental income.
- Value-add projects offer the best returns. Governments are making it easier to add rental units:
- Faster permit approvals
- Development charges waived
- More financing options for construction
- This lowers project costs, making these investments even more attractive. Plus, you have more control over your returns.
How We Can Help
If you’re unsure about your next move, we’ve got you covered.
At our brokerage, we’re not just real estate agents—we’re experienced investors.
Whether you want a turnkey property or a value-add project, we’ll guide you through every step, from finding the right property to managing renovations and beyond.
Here’s what it’s like to start as a client with us:
- Initial Consultation: We’ll talk with you to understand your needs and teach you how to invest wisely in Toronto real estate.
- Market Search & Purchase: We’ll search the market to find the perfect property for you.
- Renovation Support: If the property needs renovations, our trusted contractors are ready to help, and we’ll coach you as you manage the project.
- Leasing and Management: If you need help renting out and managing your property, our leasing and management team is here for you.
Ready to get started? Click on the link below, and let’s start working together!

What Toronto Real Estate Investment Is Right For You?
Check out our complete Toronto real estate investment guide for all the details and real-life examples. If you’re ready to dive in, just book a call with us!