Budget 2025: Big Spending, Small Surprises for Housing

The 2025 Federal Budget is out — and the Liberal Government isn’t holding back on spending this year. If you came to this blog for new news you may be disappointed to know - same ol' same ol' over spending is on the docket.

Because, why stop now?

“Investments” in economic rebuilding have pushed the projected deficit to $78.3 billion, nearly double last year’s estimate. While that’s a big number, the housing market avoided any major shakeups — and even saw a few positives.

The Market Reaction

Tuesday’s headlines pulled yields lower across the board.Ottawa’s fiscal plan projects 1.1% GDP growth in 2025/26 and an average of 1.6% through 2028/29 — slow, steady, and still recovery-mode territory.

Across the border, delayed U.S. reports and weaker economic data drove investors toward bonds, sending both Canadian and U.S. yields down slightly. Here’s where we landed:

• Canadian 5-year bond yield: -2 bps

• U.S. 5-year bond yield: -2 bps

• 5-year CMB: -1 bp

• 10-year CMB: Unchanged

• 4-year swap: -2 bps

When yields move lower, mortgage rates often follow — good news for borrowers as we look toward 2026. So if you are up for renewal - do not wait to have a discussion having time will be your best asset.

Rate Cut Odds Rising

Markets are starting to lean toward rate cuts:

• Bank of Canada (Dec 10 meeting): 15% chance of a 25 bps cut

• Federal Reserve (Dec 10 meeting): 73% chance of a 25 bps cut

If the Fed moves first — as expected — Canada’s rates could slide in sympathy, easing borrowing costs further.

What the Budget Means for Housing

While not headline-grabbing, Budget 2025 included several housing measures worth noting:

• Canada Mortgage Bond (CMB) issuance increased from $60B to $80B starting in 2026 to help fund more multi-unit rental projects. This means more liquidity and potentially lower insured borrowing costs for builders and lenders.

• Elimination of GST for first-time home buyers on new properties up to $1 million remains on the table (still awaiting Parliament approval).

• Secondary suite loan program scrapped — a disappointing move after it was announced in 2024 to help homeowners add rental units.

• $13 billion committed to “Build Canada Homes” over the next five years, focused on affordable and rental housing.

• Immigration levels stabilized with fewer temporary resident arrivals planned through 2028 — a factor that could help moderate housing demand.

Housing Supply vs. Demand

The government says this plan will “build homes at a rate not seen since the Second World War.” Ambitious words, but time will tell if the added funding translates into results.

On the bright side, the Bank of Canada’s housing affordability index has been improving for seven consecutive quarters, and average asking rents are down 3.2% year-over-year — small but positive signs for affordability.

Still, middle-class Canadians hoping to buy remain under pressure, and expanding insured amortizations to 30 years may be more of a short-term relief than a long-term solution.

The Bottom Line

Budget 2025 reinforces what many of us already know: spending is up, debt is growing, and while housing continues to dominate headlines, most measures focus on the supply side — not direct affordability for everyday buyers.

For now, bond yields remain stable to slightly lower, rate cut expectations are growing, and the overall tone heading into 2026 is cautiously optimistic.

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Emily Miszk

Mortgage BrokerBRX Mortgage

FSRA #13463