Interest Rates, Inflation & Tariffs: What the Bank of Canada’s July 2025 Report Could Mean for Ontario’s Real Estate Market

In its July 2025 Monetary Policy Report, the Bank of Canada held its overnight interest rate steady at 2.75%, citing persistent uncertainty around global trade and inflation. While the Canadian economy has shown resilience, the ripple effects of U.S. tariffs and shifting global dynamics are beginning to surface and they could have meaningful implications for the real estate market in Ontario’s rural and waterfront communities.

As a full-time REALTOR serving Georgina, Simcoe, Durham, and York Region, I’ve seen firsthand how macroeconomic shifts influence local buying and selling behavior. Let’s break down what the Bank’s latest report mean and how it could shape our market in the months ahead.

Interest Rates Hold Steady—For Now

The Bank of Canada’s decision to maintain its policy rate at 2.75% reflects a cautious stance amid conflicting signals:

• Inflation remains near target: CPI inflation was 1.9% in June, with underlying inflation around 2.5%.

• Economic growth is uneven: After strong Q1 growth, GDP likely contracted by 1.5% in Q2 due to a pull-forward in exports and weaker U.S. demand.

• Labour market is softening: Unemployment rose to 6.9% in June, with wage growth easing.

Despite these headwinds, the Bank opted not to cut rates yet. It’s watching for signs that inflationary pressures from tariffs and supply chain disruptions are easing. If they are, and if economic slack continues to grow, a rate cut could be on the table later this year.

Trade Tensions & Tariff Scenarios

The Bank’s report outlines three possible paths for global trade:

Scenario	Description	Impact on Canada’s Economy
Current Tariff	Tariffs in place as of July 27	Modest growth resumes in H2
De-escalation	Tariffs reduced or removed	Faster rebound in GDP
Escalation	New tariffs imposed, trade tensions worsen	Continued contraction

In the current scenario, Canada’s GDP is expected to grow about 1% in the second half of 2025, with slack persisting into 2026. But if tariffs escalate, the economy could shrink further—putting downward pressure on employment, investment, and consumer confidence.

What This Means for Real Estate in Georgina, Simcoe & Durham

1. Buyer Confidence May Waver

When interest rates hold steady and inflation remains near target, buyers typically feel more secure. But trade uncertainty and rising unemployment could dampen that confidence—especially among first-time buyers or those considering rural or waterfront properties.

In our market, where many buyers are relocating from the GTA or downsizing into lifestyle properties, economic anxiety can delay decision-making. People want to know their jobs are safe and their purchasing power won’t erode.

2. Mortgage Rates Could Drop Later This Year

If the Bank of Canada sees inflation easing and economic slack growing, it may cut rates in the fall. That would:

• Lower borrowing costs for buyers

• Increase affordability for entry-level homes

• Boost demand for waterfront and rural properties

For sellers, this could mean more showings, quicker offers, and stronger prices—especially if inventory remains tight.

3. Tariffs Could Impact Construction & Renovation Costs

Higher tariffs on imported goods can raise the cost of building materials, appliances, and fixtures. That affects:

• New builds: Developers may delay projects or raise prices

• Renovations: Homeowners may scale back upgrades

• Staging & prep: Sellers may face higher costs to get homes market-ready

In a region like Georgina, where many homes are older or seasonal, renovation costs are a key factor in listing decisions.

4. Rental Demand Could Rise

If economic uncertainty persists and homeownership feels out of reach, more people may turn to renting. That could:

• Increase demand for investment properties

• Boost rental rates in desirable areas

• Create opportunities for landlords in waterfront and rural zones

For investors, this is a chance to capitalize on shifting demand—especially if interest rates drop and financing becomes more accessible.

🔍 What I’m Watching Closely

As your local real estate expert, I’m keeping a close eye on:

• The Bank’s next rate decision in September

• Inflation trends, especially shelter costs

• Tariff developments and trade negotiations

• Labour market shifts in Simcoe, Durham & York Region

These factors will shape buyer sentiment, pricing strategies, and marketing approaches in the months ahead.

Final Thoughts: Clarity in Uncertain Times

The Bank of Canada’s July 2025 report underscores a simple truth: we’re in a period of economic transition. Trade tensions, inflation pressures, and interest rate decisions are all converging to create a complex landscape.

But here’s the good news: in real estate, clarity is power. By staying informed, adapting to market signals, and working with a full-time professional who understands the nuances of rural and waterfront properties, you can make confident, strategic decisions—whether you’re buying, selling, or investing.

If you’re wondering how these macro trends affect your specific situation, let’s talk. I’m here to help you navigate the market with insight and integrity.