According to the Financial Post of Canada, the Canadian spring market in 2025 is coming to an end without the expected boom. Some industry observers said that the mortgage interest rate needs to drop to 3% for the real estate market to be saved and to reignite the enthusiasm of the Canadian real estate market and home buyers.

According to the data provided by MortgageLogic, the lowest interest rate for the five-year fixed-rate mortgage, which is favored by many Canadian homebuyers and homeowners, is currently 3.74%.

Senior economist Robert Kavcic of BMO Capital Markets said: "We never really expected a significant rebound in the spring real estate market. One reason is that the current borrowing cost level is not low enough to trigger a large amount of real estate activity."

Recently, a house worth more than 1.8 million Canadian dollars was sold in Bayview Hill, a wealthy community in Richmond Hill north of Toronto, which is something that has not happened for many years.

This house has an area of over 3000 square feet, with a frontage lot width of 125 feet, which is exceptionally wide.

According to records, this house was once listed for sale at 2.5 million Canadian dollars in 2017 but did not sell; last June, it was relisted for sale at 2.25 million Canadian dollars, and after multiple price reductions, it was finally sold on Tuesday this week for 1.82 million Canadian dollars.

In response, Chinese netizens exclaimed: "Even the wealthy hills can't hold up anymore."

A recent survey by BMO Bank confirmed this conclusion. The survey showed that 68% of potential homebuyers said that the current borrowing interest rates are still a stumbling block for homebuyers.

Nearly 40% of respondents said that the interest rate would need to fall to 3% or lower before they would consider purchasing a house or refinancing.

"A 3% mortgage interest rate is actually reasonable... from the perspective of affordability and even from an investment standpoint, but a borrowing cost of 4%, for many people, is still very tight and doesn't make much sense," Kavcic said.

Mortgage broker Andy Hill said that a 3% or lower mortgage interest rate is a magical number for some people.

"When the interest rate reaches 3%, the real estate market will recover, and we will start to see more transactions," he said. "We are slowly achieving this goal, but recent (tariff) fluctuations have increased uncertainty."

Hill said that past expectations and homebuyers' desire to live more frugally led them to react negatively to interest rates above 4%.

In addition, he said that Canadians who want to buy a house have little room for flexibility in their willingness to pay.

For example, according to a survey by EveryRate at the end of last year, 67% of Canadians said that they could afford to pay up to 1,749 Canadian dollars per month for housing costs. Moreover, among respondents with an annual income of at least 100,000 Canadian dollars, 42% said they could not afford a mortgage higher than the average.

Canada Mortgage and Housing Corporation (CMHC) said that the average monthly mortgage payment is 1,829 Canadian dollars.

This means that under the current housing environment, many people have limited choices, as the average house price in Canada, according to the Canadian Real Estate Association, is 678,331 Canadian dollars.

Hill said that the average mortgage amount most Canadians can afford is around 350,000 Canadian dollars, usually with a loan term of 25 years, but a 30-year amortization period helps reduce the monthly payment to approximately 1,780 Canadian dollars at the current borrowing interest rate.

But he said that this payment is not affordable for many people, depending on where they want to buy a house.

The average price of a first-time home in Canada is 351,000 Canadian dollars, but in Vancouver, it exceeds 800,000 Canadian dollars.

"For first-time homebuyers, if the down payment is less than 20%, there will be a huge difference between the amount they can afford and the actual amount," Hill said.

Source:

https://financialpost.com/real-estate/mortgage-rates-3-or-lower-reignite-canadas-housing-market

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