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Rates are based on an average mortgage of $500,000
| Insured | 80% LTV | 65% LTV | Uninsured | Bank Rate | |
|---|---|---|---|---|---|
| 1-year fixed rate | 4.94% | 4.19% | 4.19% | 6.20% |
5.84%
|
| 2-year fixed rate | 4.29% | 4.09% | 4.09% | 4.44% |
5.29%
|
| 3-year fixed rate | 3.87% | 4.04% | 4.04% | 4.24% |
4.64%
|
| 4-year fixed rate | 4.09% | 3.99% | 3.99% | 4.44% |
4.54%
|
| 5-year fixed rate | 3.94% | 3.99% | 3.99% | 3.99% |
4.24%
|
| 7-year fixed rate | 4.39% | 4.29% | 4.29% | 5.85% |
5.25%
|
| 10-year fixed rate | 5.04% | 4.59% | 4.59% | 5.89% |
7.04%
|
| 3-year variable rate | 4.30% | 4.40% | 4.40% | 4.70% |
6.60%
|
| 5-year variable rate | 4.15% | 4.20% | 4.20% | 4.20% |
4.45%
|
| HELOC rate | N/A | N/A | N/A | N/A | N/A |
| Stress test | 5.25% | 5.25% | 5.25% | 5.25% | N/A |
Updated
These values are as of Feb. 20, 2025:
Bank of Canada Overnight Target Rate: 3.00% (a decline of 25 bps)
5-year Government of Canada benchmark bond yield: 2.63%
Prime Rate: 5.20%
5-year Fixed (Insured)*: 4.29%
5-year Fixed (Uninsured)*: 4.79%
5-year Variable (Insured)*: 4.55% (P-0.65%)
5-year Variable (Uninsured)*: 4.70% (P-0.50%)
*Lowest nationally available mortgage rates.
Total Consumer Price Index (Inflation): 1.80%
National Unemployment Rate: 6.7%
Real GDP by expenditure (Q3 2024): +0.3%
Real GDP per capita (Q3 2024): -0.4%
There are many question marks when it comes to mortgage rates in 2025.
So far, the trend has been downward, with mortgage rates declining throughout most of 2024 and early 2025, alongside the inflation rate.
The question is – with US President Trump’s 25% tariffs on aluminum and steel in effect (in addition to Canada’s counter-tariffs), what will be their impact on Canadian mortgage rates? Will the rates go back up, stay the same or continue decreasing?
Unfortunately, there is no concrete answer as of right now – especially given how ever-changing the situation has been so far. That said, we can break things down to paint a clearer picture – at least in terms of where things could be going.
On January 29, 2025, the Bank of Canada dropped its overnight target rate (also known as policy rate, key interest rate or target rate) to 3.00% – a reduction of 25 basis points (bps) from the previous rate, set on December 11, 2024.
The prime rate from Canada’s Bix Six banks (TD, RBC, CIBC, BMO, Scotiabank and National Bank) currently sits at 5.20%, having gone down 25 bps from the rate set in December 2024. It’s normal for the Big Six to have identical prime rates and for the rates to follow the same trajectory as the Bank of Canada’s policy rate (this is true of variable rates as well). Big notable exception is TD Bank, which actually has two prime rates:
Where things are going: To understand where the rates are going, some historical context might help. The supply chain shortages caused by the COVID-19 pandemic have resulted in a steep rise in inflation (with the Total CPI peaking at 8%) in the years leading up to 2025. To combat it, the Bank of Canada has steadily increased its policy rate until it peaked at 5.00% in July of 2023 (the prime rate hit 7.20% during that month). There it remained for the rest of the year.
By Q2 of 2024, the inflation rate fell below 3%, motivating the Bank of Canada to start decreasing its rate at 50-to-25-bps intervals throughout the remainder of the year, with the latest decrease happening in January of 2025.
Last year, we’ve projected that the overnight rate and prime rate would drop 100 bps by the end of 2025, reaching 2.25% and 4.45%, respectively.
Does the trade war negate this prediction? Not necessarily. Let’s look into it.
Here are the factors to watch out for when it comes to the impact of the US-Canada trade war on the mortgage rates:
1. Inflation
Rise in inflation is the biggest reason for the rates to go up. As of February 2025, the inflation rate remains low, sitting at 1.8% (2% is the expected baseline in a healthy economy).
To clarify, the type of inflation the pandemic has caused is known as ‘demand-pull’ inflation, which occurs when prices rise due to excessive demand and low supply. Increase in rates forces consumers to borrow and spend less, which in turn equalizes supply and demand and lowers prices.
The tariffs could lead to what’s known as ‘cost-push’ inflation, caused by increases in the price of vital goods and services for which there is no alternative (this type of increase is usually ‘artificial,’ meaning it’s not dictated by the market). US tariffs on Canadian goods (and Canada’s counter-tariffs) fall under this category. While some of the cost would be absorbed by businesses, leading to thinner margins, the rest would be passed down to consumers (see the Bank of Canada’s full breakdown for more details). This type of inflation cannot be combatted with rate hikes.
There is a chance that the US-Canada tariff war could severely disrupt Canada’s supply chains, causing demand-pull inflation to flare up again, which could lead to the rates going up.
However, what’s more likely is that the inflation rate will remain in the 2%-3% range, meaning that the rates should maintain their downward trajectory.
2. Canada’s overall economic health
Though the inflation rate has been sitting at a decent 1.8%, as of December 2024, the Canadian dollar remains at a 22-year low (trading 0.5% lower than the US dollar). It’s poised to go even lower, now that the tariffs are in effect. The unemployment rate may go up, as companies in the affected industries will eventually begin to downsize.
Prior to the trade war, Canada’s Real GDP per Capita has been projected to grow throughout 2025. However, the combined effects of increased unemployment and weakening Canadian currency are likely to lower the GDP even more.
On the positive side, with the rates being low, there is still a chance for residential investment to grow in Q2 and Q3 of 2025.
Depending on how dire the situation gets with the tariffs, the Bank of Canada could lower its rate by as much as 150 bps by the end of 2025 (with potential emergency cuts outside of the scheduled meetings). But, for now, we’ll keep our forecast at a conservative 100 bps (minus the latest 25-bps drop).
Variable rates follow the same trajectory as the prime rate. So, if a prime rate goes down 50 bps, that means that the variable rates will also go down 50 bps. There were exceptions in the past, however, when lenders didn’t adjust their prime rates by the same amount, such as on January 2015 and July 2015, so this isn’t always a guarantee.
According to a York University study, Canadians who have opted for variable rates were consistently able to maintain lower rates over the course of their mortgage than those who have opted for fixed rates.
The trade-off is that variable rates are more erratic, but they are often lower than fixed rates.
With the expectation that the prime rate might fall 100 bps by the end of 2025 (minus the recent 25-bps cut), here are our 5-year variable rate projections for the Big Six banks, based on what is currently advertised:
| Big Six banks | Current 5-year closed variable rates (special offer) | Projected 5-year closed variable rates (special offer) |
|---|---|---|
|
TD |
5.14% |
4.39% |
|
CIBC |
4.75% |
4.00% |
|
RBC |
4.75% |
4.00% |
|
BMO |
4.80% |
4.05% |
|
Scotiabank |
5.65% |
4.90% |
|
National Bank |
4.70% |
3.95% |
Note: These projections are highly speculative. They may change based on a variety of economic factors, including inflation and housing market. In addition, the variable rate you may secure for your mortgage could higher or lower based on your individual circumstances.
Given that variable rates are projected to decline, they might make a worthy alternative to fixed rates. Keep in mind that any economic instability that could lead to inflation spikes could also result in higher rates – even if the current trajectory suggests the opposite.
Unlike variable rates, fixed rates don’t follow the same pattern as the prime rate. Instead, fixed rates are based on government bond yields, which, in theory, should result in higher but more stable rates overall. ‘In theory’ are the key words here, since variable rates have been higher than fixed rates for about three years. You might see posted fixed rates being higher than posted variable rates, but that’s unlikely to be the case once you start negotiating your rates with your lender (you’re more likely to secure a lower fixed rate – at least in the current economic climate).
Homebuyers who just want commit to a certain payment amount per month, without worrying about the economy at large, should opt for fixed rates instead of variable rates. The trade-off is that your mortgage payments are guaranteed to be higher.
Like the Bank of Canada rate, bond yields also saw an increase following the pandemic, reaching their peak in September 2023. After that, they have been on the decline, and the fixed rates followed.
With the US-Canada trade war injecting a great deal of uncertainty into the market means that the bond yields will fluctuate, and so will the fixed rates by about 15 bps. The broader trend is still more or less downward, however. With the Bank of Canada rate on the decline as well, there’s a chance for fixed rates to drop 25 bps by the end of 2025.
With that in mind, here’s what the currently advertised 5-year fixed rates might look like by the end of 2025:
| Big Six banks | Current 5-year closed fixed rates (special offer) | Projected 5-year closed fixed rates (special offer) |
|---|---|---|
|
TD |
5.04% |
4.79% |
|
CIBC |
4.59% |
4.34% |
|
RBC |
4.59% |
4.34% |
|
BMO |
4.74% |
4.49% |
|
Scotiabank |
6.49% |
6.24% |
|
National Bank |
4.59% |
4.34% |
Note: These projections are highly speculative. They may change based on a variety of economic factors, including inflation and housing market. In addition, the fixed rate you may secure for your mortgage could be higher or lower based on your individual circumstances.
It is hard to get the same mortgage rate your friend might have gotten while shopping around for rates in Canada. Here are some of major factors which impact your mortgage rates:
2025 predictions for Canadian mortgage rates vary wildly from expert to expert. Economy is rarely predictable. However, regardless of the specifics, the consensus is that mortgage rates are poised to continue decreasing, as long as the inflation remains at around 2%.
With that in mind, here are some predictions from the top experts in the country:
The Bank of Canada is expected to continue cutting its target rate throughout 2025, as long as the inflation rate does not significantly exceed the 2%-3% range (as of December 2024, it’s 1.9%). Most experts predict that the rate will go down to 2.25% by the end of the year, which is considered ‘neutral.’ This is poised to happen despite the US-Canada trade war – though it could lead to an even lower rate.
Consequently, the prime rate should go down to 4.45%. Variable rates, which follow the prime rate, will see similar reductions.
Fixed mortgage rates, however, follow government bond yields, which saw the bulk of their reductions in 2024. This means that 2025 is unlikely to see further big reductions. As a result, fixed rates won’t change much either. The expected drop as of February 2025 is 25 bps.
The number of homes sold across Canada has declined from October and November to December of 2024, according to the MLS Home Price Index report from January 2025. The month-over-month decline from November to December was 5.8%. Lower sales mean even lower prices. For instance, Ontario’s composite benchmark price dropped from $851,400 to $849,600 between November and December. This is similar to what’s happening at the national level.
At the same time, the national sales-to-new listings ratio went down to 56.9% in December – from a 17-month high of 59.3% in November – indicating more balanced housing market conditions (readings between 45% and 65% is the sweet spot, given that Canada’s long-term average is 55%).
Furthermore, monthly payments should be lower due to decreasing interest rates and more laxed mortgage measures in place. Those measures include 30-year amortization for insured mortgages for first-time homebuyers (purchasing new builds or resales) and a $1.5-million mortgage limit (which is an increase from $1 million) for those making a down payment of less than 20%.
Going into spring of 2025, mortgage should be both more affordable and obtainable, especially for new homebuyers.
Because of this, CREA is confident that home sales will rebound this spring.
Victor has 17 years of mortgage and real estate experience. He started his mortgage career in 2007 shortly after completing his undergraduate studies. After numerous awards and helping thousands of people with residential mortgage financing, he set his sights on the real estate industry as a second career to provide more value as a mortgage professional. One of his passions is helping people make informed decisions with education and guidance. His approach is personable, honest, and direct and he believes successful transactions result from working together as a team to achieve a common goal.
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