Are you planning to buy or invest in real estate in Southern Ontario and hoping to see another rate cut from the Bank of Canada? One major factor that shapes our decisions when it comes to home buying is Interest Rates.
What is the relationship between interest rates and home buying? For individuals living in areas like Hamilton, Burlington, and St. Catharines, interest rates are a key factor to determine the amount of mortgage for which you qualify, the best time to buy, and the potential, future appreciation.
Looking at the data, the Bank of Canada maintained its overnight rate at 2.75% throughout July of 2025, and the Bank is expected to cut rates twice during the second half of the year. These changes could lower the cost of borrowing, improve affordability, and increase prices across Ontario. Knowledge gained from interest rates can assist you in making well-informed decisions.
What are Interest Rates?
At its core, the definition of interest rate can be stated to be the price paid for the money that is borrowed. When you take out a mortgage to buy a home, you repay the loan with interest—the percentage charged by your lender is influenced heavily by the Bank of Canada’s rate.
What Influences the Changes in Interest Rates?
What causes interest rates to change?
- Inflation: Increasing inflation will tend to lead to rate hikes which are meant to slow the economy.
- Employment rates: Good job growth may result in increased employment.
- Global Events: Events that may influence rate decisions are trade disputes, world recessions, and foreign policy changes.
- Central Bank Policy: Bank of Canada sets its own policy to stabilize the economy and achieve agreed-upon targets of the inflation
Such changes not only influence the consumer but also the institutional investor and lenders which further influence the rate of mortgages.
What is the impact of Interest Rate on Home Buying?
What You Can Afford
As the interest rates go higher, your mortgage payments will go higher.
For example:
- At an interest rate of 2.75% and a mortgage of $600,000 it would cost you $2,750/month
- The same mortgage at 3.75% will cost you $3080/per month
As little as 1% will have the power to lower your buying power drastically. First-time home buyers in Hamilton may consider homes in other communities like Binbrook, Mount Hope or Caledonia.
Pro tip: Consult with your trusted local REALTORS® who can steer your expectations based on what is happening now on the market and availability of financing.
Profit vs. cost: Investment decisions
In the case of investors, how does interest rate influence the purchase of a home? What is the cost of capital as compared to profit potential?
- Increase in interest rates minimizes the flow of cash in rentals
- The possibilities of high-leverage strategies and better ROI could be created with lower rates
Wise investors often look for markets with strong rent-to-price ratios and long-term growth potential, such as suburban areas surrounding Hamilton and the Golden Horseshoe.
Buyer Behaviour Shifts
When interest rates go up:
- Fewer buyers compete for homes
- Longer days on market
- Price drop in busy areas and may flatten the rate
This can be advantageous for first-time buyers who struggled during bidding wars.
Expert Insights: Why Local Realtors Matter
Southern Ontario real estate is uniquely dynamic. Market changes exist within short distances, and understanding them requires local expertise.
Best REALTOR® are more than just property finders, they’re strategic advisors. They help you through the entire process:
- Whether to go with a fixed versus variable rate mortgage
- Knowing when the right time is to lock in a rate
- Compare pre construction homes with resale homes
The best REALTORS® can provide you with a tailored suggestion, a solution with all the needs of lifestyle and trends along with your financial objectives.
Final Thoughts
How then do interest rates affect your chances of owning a house? They tell you what you can afford, when the right time is to purchase and what the duration of your commitment. It is vital to be current with market fluctuations.
However, the numbers alone do not really give the entire picture. Getting someone to advise you, such as local real estate professionals who have been through this journey before will give you the facts you need to know to make an informed decision.
Want to buy or invest in a property?
Whether you want to purchase your own home or add some more investments to your portfolio in Southern Ontario, it is the right time to contact a reputable REALTORS® in Hamilton. Market Knowledge, Negotiation Skills, and the personal touch can assist you in moving on with your venture.
