What just happened—and why
On October 29, 2025, the Bank of Canada cut its policy rate by 0.25% to 2.25%, citing a softer economy, easing inflation pressures, and a weaker job market. Canada’s big banks promptly trimmed their prime rate by 0.25 percentage points to about 4.45%, which feeds through to variable-rate loans and lines of credit.
In plain English: growth has cooled, inflation is gliding closer to target, unemployment has drifted higher, and the Bank is nudging rates lower to support the economy without reigniting inflation.
How this could affect the PEI real estate market
The PEI real estate market has been relatively steady in 2025. As of September 2025, the benchmark price was essentially flat year over year (+0.9%), average price up ~3.5%, and new listings up ~7.6%—a picture of balance rather than frenzy. A lower prime rate typically reduces variable mortgage payments and can coax fence-sitters back into the market, supporting sales without necessarily spiking prices.
Local forecasts earlier this year also pointed to firmer activity through 2025–26, which a modest rate cut could reinforce—though affordability and broader economic news still matter.
If you’re a buyer
- Monthly payments: Variable-rate quotes should edge lower after the prime cut. That improves cash flow and can widen the set of homes you can comfortably carry.
- Qualification (“stress test”): For most uninsured mortgages, lenders must qualify you at the higher of 5.25% or your contract rate +2%. As contract rates drift down, your qualifying rate can tick down too—though many borrowers will still be tested above 5.25%. Translation: getting a mortgage on PEI might be slightly easier than a month ago, but it’s not a night-and-day change.
- Selection & negotiating room: With listings up and prices stable, you’ll likely see better choice and more room to negotiate on condition dates or minor price adjustments.
If you’re a seller
- Buyer demand: Lower carrying costs can nudge more buyers to book showings, which helps well-priced listings move. Expect a little extra traffic rather than bidding wars.
- Pricing strategy: With the market near balance, precise pricing and strong presentation (repairs, staging, pro photos) matter. The data doesn’t show runaway price gains; it shows steady.
- Time to sale: Slightly lower rates can trim days on market at the margin, especially for move-in-ready homes in popular segments (starter homes, downsizer bungalows).
Will mortgages become easier to get?
Slightly, mainly for variable-rate borrowers and anyone whose contract rate drops enough to lower their stress-test hurdle. That said, lenders still apply prudent underwriting, and a large cohort of Canadian borrowers renewing in 2025–26 will face higher payments than their pandemic-era rates—so banks remain cautious.
For PEI home financing, that means approvals may loosen a touch compared to earlier in 2025, but income, debt levels, and down payment strength still carry the day.
Is now a good time to buy a home on PEI?
If you have job stability, a healthy emergency fund, and you find a home that fits your long-term plan, now is a reasonable time to buy on PEI. Rates are lower than they were at the start of the year, selection is better, and prices are stable. If you’re stretching to qualify or counting on rapid price appreciation, be more cautious—rate paths can change and the national backdrop is still mixed.
Quick next steps (buyer checklist)
- Get a rate hold and a written pre-approval to lock in today’s lower rates for 90–120 days.
- Ask your broker how the stress test applies to getting a mortgage on PEI in your price range.
- Compare fixed vs. variable scenarios—monthly payment vs. flexibility—using today’s prime rate backdrop.
Bottom line
The Bank of Canada’s latest trim lowered prime and provided a mild tailwind to activity. On PEI, that likely means incrementally stronger demand, steady pricing, and a small improvement in PEI home financing conditions—good news for prepared buyers and for sellers who price smartly.
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