Introduction
If you have been waiting for the “perfect moment” to make your move in the Ontario real estate market, yesterday’s announcement might just be the green light you were looking for.
On December 10, 2025, the Bank of Canada officially announced it is holding its key policy interest rate at 2.25%. Governor Tiff Macklem described the Canadian economy as “proving resilient,” signaling that we have finally reached a period of stability after years of volatility.
For homeowners and prospective buyers across the Greater Toronto Area and Ontario, this pause is significant. It confirms that the aggressive rate cuts of early 2025 are likely over, and we are settling into a new normal. But what does a steady 2.25% rate actually mean for your monthly payments, your buying power, and the value of your home?
In this comprehensive guide, Quantum Team Realty breaks down the numbers, the strategy, and the opportunities in Ontario’s late-2025 real estate market.
1. The “New Normal”: Understanding the 2.25% Hold
The decision to hold the rate at 2.25% was not a surprise to economists, but the reasoning behind it is what matters to homeowners and buyers. The Bank cited strong GDP growth of 2.6% in Q3 and a solid job market that recently added 181,000 jobs as proof that the economy can handle current borrowing costs.
Key Takeaway:
Canada is no longer in emergency mode. Inflation is near the 2% target, economic growth is steady, and borrowing costs have leveled off.
How This Affects Your Rate Today
Your mortgage rate is directly influenced by this policy rate. As of mid-December 2025, rates stand approximately as follows:
- Prime Rate: 4.45%
- 5-Year Fixed: 3.79% – 4.29%
- Qualifying Rate: Approximately 5.79%
Stability is often better than falling rates. When rates drop quickly, panic buying returns and prices rise. A rate hold keeps prices steadier while giving buyers affordable borrowing options.
2. Fixed vs Variable: The 2026 Strategy
For the past two years, many buyers were advised to ride variable rates down. With the Bank of Canada now holding at 2.25%, that strategy is shifting.
The discount once offered by variable rates has narrowed, while competitive fixed-rate offers have become more attractive.
$600,000 Mortgage Comparison
5-Year Fixed Rate
- Typical Rate: Approximately 3.79%
- Monthly Payment: Approximately $3,088
- Risk Profile: Low, locked in until 2030
- Pros: Cheaper monthly payment today
- Cons: Higher penalty to break early
5-Year Variable Rate
- Typical Rate: Approximately 3.95%
- Monthly Payment: Approximately $3,143
- Risk Profile: Moderate
- Pros: Lower penalty to break
- Cons: Payments could rise if rates increase
Verdict:
For the first time in a while, fixed rates are winning on price. Most Quantum Team Realty clients are choosing three-year or five-year fixed terms to lock in sub-4% rates while they can.
3. Market Snapshot: Prices and Inventory (Winter 2025)
While rates have stabilized, home prices across Ontario have softened, creating a unique opportunity for buyers.
As of October 2025, the average home price in Ontario was $833,376, down 5.2% year-over-year.
Ontario Regional Price Overview
- Toronto (416): $1,069,807 – Buyer’s Market
- GTA (905): $1,054,372 – Buyer’s Market
- Hamilton: $777,800 – Buyer’s Market
- Ottawa: $709,002 – Balanced Market
- Ontario Average: $833,376 – Balanced Market
What this means:
Buyers have leverage. Inventory remains high and sellers are negotiating.
Sellers must price accurately. Certainty is returning, but buyers are disciplined and price-sensitive.
4. The Renewal Shock Is Softening
Millions of Canadians are renewing mortgages in 2025 and 2026. While renewing today is still an increase compared to pandemic-era rates, the jump is far smaller than feared earlier in the year.
For a $500,000 mortgage balance:
Renewal rates earlier in 2024 at approximately 6.0% resulted in payments near $3,200 per month.
Renewing today at approximately 3.79% results in payments closer to $2,570 per month.
That difference translates to savings of roughly $630 per month.
If your renewal is within the next 120 days, locking in now can protect you if bond yields rise unexpectedly.
5. Buying Power Boost: The Stress Test Effect
Canada’s mortgage stress test requires buyers to qualify at their contract rate plus 2%. As rates fall, the qualifying bar drops, increasing purchasing power.
Buying Power Example
Based on a $120,000 household income with a 25-year amortization:
At peak 2024 rates, buyers qualified for approximately $460,000.
As of December 2025, buyers qualify for approximately $535,000.
This increase of roughly $75,000 often determines whether buyers can move from a condo to a townhouse or from a townhouse to a semi-detached home.
Conclusion
The Bank of Canada’s decision to hold rates at 2.25% has delivered what the Ontario real estate market needed most: confidence.
Rates are stable. Prices have corrected. Inventory remains healthy. For buyers, this is a rare opportunity before market activity potentially increases again in 2026.
At Quantum Team Realty, we help clients across Ontario navigate these conditions with clarity and strategy. We do not simply facilitate transactions. We help clients make informed, long-term financial decisions.
If you are considering buying, selling, renewing, or investing, now is the time to focus on positioning rather than waiting.
Frequently Asked Questions
Is the Bank of Canada done cutting rates?
Based on recent statements, further major cuts are unlikely unless economic conditions change materially.
Should I lock in a fixed rate now?
With five-year fixed rates below 4%, many buyers are choosing stability and predictability over variable risk.
Is now a good time to buy in the GTA?
Yes. Prices are down, inventory is high, and buying power has improved, creating a buyer-friendly environment.
How does the 2.25% rate compare historically?
It is significantly lower than the 5% rates seen in 2023-2024 and is considered neutral by historical standards.
I am renewing in 2026. Should I worry?
Preparation matters, but panic does not. Budgeting around a 4% rate is far more realistic than last year’s forecasts.
Sunny Chadha
Sunny Chadha is the Co-Founder of Quantum Team Realty and brings over 15 years of experience in Niagara real estate. He is passionate about helping clients make informed decisions and sharing his deep knowledge of the local market.
References
CBC News – Bank of Canada holds key interest rate at 2.25%, Bank of Canada – Policy rate announcement , WOWA – Ontario mortgage rate data
RBC Economics – Interest rate update, Ontario Real Estate Association – October 2025 market report, Nesto – Mortgage rate forecast
