How the Current Mortgage Interest Rate Change Affects the Fraser Valley Market

The Bank of Canada recently reduced its benchmark interest rate by 25 basis points, bringing it down to 2.50% as of September 17, 2025. This is the first rate cut in about six months, reflecting easing inflation pressures and a weakening labor market.

Here’s how this change is impacting the Fraser Valley real estate market right now.

Current Mortgage Rates & What Buyers Are Seeing

• The average 5-year fixed conventional mortgage rate is about 4.70%.
• Variable or adjustable rate mortgages remain slightly below or around that, depending on lender and discount off prime.
• Some lenders are adjusting their variable rates down in response to the Bank’s cut; fixed rates, however, are slower to move due to bond market influences.

This means that while the cost of borrowing hasn't dropped dramatically overnight, there is some easing, particularly for those who are on variable-rate mortgages or are renewing.

Effects on Fraser Valley’s Market Dynamics

Using the latest Fraser Valley Real Estate Board (FVREB) data:

●The market remains a buyer’s market: active listings are quite high (around 10,650 in July), which is nearly 50% above the 10-year seasonal average.
●Sales are down slightly: about 1,190 sales in July, down 0.5% from June and about 3% year-over-year. The sales-to-active-listings ratio is roughly 11%, below the typical “balanced market” threshold (12-20%). That means there are more homes for sale than there are buyers, which gives buyers leverage.
●Prices are softening: The composite benchmark price declined by about 0.7% in July. Also, year-over-year benchmark price drops of more than 1% have been reported in earlier summer months.

Why the Rate Cut Matters — What It’s Triggering

1. Slight Relief for Mortgage Payments
    For current and prospective buyers, especially variable-rate mortgage holders or those renewing, the rate cut provides modest relief. Monthly payments won’t rise as aggressively going forward, and for new variable-rate deals, lower rates off prime are now possible.
   
   
2. Stimulating Buyer Confidence
    Interest rate cuts tend to signal that central bankers believe inflation is stabilizing and that the economic outlook is softening. That helps reduce fear of further rate hikes—and that, in turn, can encourage hesitating buyers to re-enter the market.
   
   
3. Fixed Rate vs Variable Rate Trade-off
    Fixed-rate mortgages remain relatively higher because they depend heavily on bond yields, which haven’t dropped in lockstep with policy rates. Buyers deciding between fixed and variable terms will have to weigh predictability against potential savings.
   
   
4. Pressure on Sellers
    Sellers are under more pressure: with more inventory and weaker buyer demand, realistic pricing, good staging, and condition/repairs matter more than ever. Homes priced too aggressively are staying on the market longer.
   
   
5. Opportunities for First-Time & Move-Up Buyers
    For buyers who have budget flexibility, current conditions offer more options: choice, negotiation leverage, and less competition. First-time buyers, particularly, may benefit from entry points before prices rebound (if they do).
   
   

What’s Next: Risks & Potential Scenarios

●If economic conditions deteriorate (drops in employment, worsening inflation, weaker exports), the Bank could cut again. That would help further with affordability but could also keep fixed rates volatile.
●On the other hand, if inflation picks up unexpectedly, bond yields might rise, pushing fixed mortgage rates up, which could blunt the impact of the policy rate cut.
●Renewals: many homeowners whose fixed-term mortgages expire in the next year or two could face “payment shock” as they renew at new (often higher) fixed rates.

Key Takeaway

In short: the recent rate cut to 2.50% has eased some pressure, but it hasn’t transformed the Fraser Valley market. We’re seeing modest relief for some borrowers, more options for buyers, and increased pressure on sellers, but prices are still under downward pressure, and the market remains in favour of buyers.

For sellers especially, realistic pricing, home preparation, and responsiveness to feedback are more important than ever. For buyers, this is a window of opportunity—but one to use wisely, especially considering mortgage term choices and long-term affordability.