Canadian Mortgage Rate Forecast 2025
Learn about 2025 interest rate trends that impact your mortgage rates.
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The Best Current Mortgage Rates in Canada
Evaluate Canadas best mortgage rates in one place. RATESDOTCAs Rate Matrix lets you compare pricing for all key mortgage types and terms.
Rates are based on an average mortgage of $500,000 and subject to change based on filter criteria.
Updated 21:27 on May 16, 2025| Placeholder |
Insured
The rates in this column apply to borrowers who have purchased mortgage default insurance.
This is required when you purchase a home with less than a 20% down payment.
The home must be owner-occupied and the amortization must be 25 years or less.
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80% LTV
The rates in this column apply to mortgage amounts between 65.01% and 80% of the property value. The home must be owner-occupied and have an amortization of 25 years or less. You must have purchased it for less than $1 million. These rates are not available on refinances. Refinances require "Uninsured" rates.
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65% LTV
The rates in this column apply to mortgage amounts that are 65% of the property value or less. The home must be owner-occupied and have an amortization of 25 years or less. You must have purchased it for less than $1 million. These rates are not available on refinances. Refinances require "Uninsured" rates.
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Uninsured
The rates in this column apply to purchases over $1 million, refinances and amortizations over 25 years. More info on the differences between insured and uninsured rates.
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Bank Rate
Bank Rate is the mortgage interest rate posted by the big banks in Canada.
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|---|---|---|---|---|---|
| 1-year fixed rate | 4.69% | 4.19% | 4.19% | 5.59% |
5.49%
|
| 2-years fixed rate | 3.89% | 3.89% | 3.89% | 4.70% |
4.79%
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| 3-years fixed rate | 3.87% | 3.89% | 3.89% | 4.09% |
4.39%
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| 4-years fixed rate | 3.99% | 3.99% | 3.99% | 4.44% |
4.39%
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| 5-years fixed rate | 3.74% | 3.84% | 3.89% | 3.84% |
4.09%
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| 7-years fixed rate | 4.39% | 3.99% | 3.99% | 5.19% |
5.00%
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| 10-years fixed rate | 5.04% | 4.34% | 4.34% | 5.29% |
6.09%
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| 3-years variable rate | 4.15% | 4.30% | 4.30% | 4.40% |
6.35%
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| 5-years variable rate | 3.95% | 3.95% | 3.95% | 4.05% |
4.25%
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| HELOC rate | N/A | N/A | N/A | N/A |
N/A
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| Stress Test | 5.25% | 5.25% | 5.25% | 5.25% |
N/A
|
Content Writer
Key rates and economic numbers
These values are as of Apr. 30, 2025:
Bank of Canada Overnight Target Rate: 2.75% (no change)
5-year Government of Canada benchmark bond yield: 2.66%
Prime Rate: 4.95%
5-Year Fixed (Insured)*: 3.74%
5-Year Fixed (Uninsured)*: 3.84%
5-Year Variable (Insured)*: 4.00% (Prime-0.95%)
5-Year Variable (Uninsured)*: 4.05% (Prime-0.90%)
*Lowest nationally available mortgage rates.
Total Consumer Price Index (Inflation): 2.3%
National Unemployment Rate: 6.7%
Real GDP by expenditure (Q4 2024): +0.6%
Real GDP per capita (Q3 2024): +1.0%
Canadian mortgage rate forecast 2025
There are so many question marks when it comes to mortgage rates in 2025.
Thus far, mortgage rates have been trending downward, following a steady decline throughout most of 2024 and into early 2025, in tandem with easing inflation.
A critical question is how U.S. President Trump’s tariffs on Canadian goods—along with Canada’s retaliatory counter-tariffs—will influence Canadian mortgage rates. Will rates rise, stabilize or continue their downward trajectory?
By analyzing the available data, we can outline potential scenarios about where rates might be headed.
Bank of Canada’s policy rate cuts and the prime rate
On April 16, 2025, the Bank of Canada maintained its overnight target rate (also known as policy rate, key interest rate, or simply as the target rate) at 2.75%. The rate was last adjusted on March 13, 2025, which was a reduction of 25 basis points (bps) from the previous rate, set in January.
The prime rate from Canada’s Bix Six banks (TD, RBC, CIBC, BMO, Scotiabank and National Bank) currently sits at 4.95%, remaining unchanged from March. It’s typical 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 rate mortgages as well).
Notable exception is TD Bank, which actually has two prime rates:
- TD Prime: This rate applies to TD Flexline mortgage product (mortgage + Home Equity Line Credit or HELOC) and other lines of credit. It is currently 4.95%.
- TD Mortgage Prime (TDMP): This applies to stand-alone variable rate mortgage only (i.e., a home equity line of credit or HELOC are not attached to the mortgage). It is currently 5.10%.
Where things are going
The Bank of Canada has made it clear that it has limited tools to directly address the effects of a trade war, as those decisions fall under fiscal policy. However, its main goal remains to prevent rising prices from turning into long-term inflation.
In its statement about the April rate hold, the Bank stated that its longer-term inflation expectations remain unchanged, meaning that it’s expected to hover at around 2% as we head into 2026. Inflation has been a bit on the higher in the last few months—coming in at 2.6% in February and 2.3% in March. This is due to the end of the temporary suspension of the GST/HST, combined with the increase in good price inflation.
Due to the concern that both tariffs and supply chain disruptions could push up some prices, the Bank’s short-term inflation expectations have moved up. That said, other factors, such as the removal of the consumer carbon tax and lower global oil prices, could push the inflation down.
The Bank’s strategy is to continue examining the timing and strength of both downward and upward pressures on inflation (affected by weaker economy and higher costs, respectively) to ensure long-term price stability.
Our initial expectations aligned with the economists at the Bank of Montreal, who anticipated rate cuts of 25 bps at each of the upcoming meetings. However, as of April, this outlook no longer holds true. Most Big Banks still anticipate a rate drop of 25 to 50 bps in summer, down to 2.50% or 2.25%, with some expecting an additional drop of 25 bps in late summer or fall, down to 2.00%. The latter is the most optimistic projection, with the most pessimistic one coming from Scotiabank, which expects the rate to hold at 2.75% until the end of the year.
The impact of the U.S.-Canada trade war
The ongoing U.S.-Canada tariff war poses a risk of major supply chain disruptions, which could reignite inflationary pressures.
Although inflation had moved downwards before the trade war began, the Canadian dollar is at a 22-year low, trading 0.5% below the U.S. dollar. With tariffs now in effect, the currency is expected to weaken further. This could also lead to a rise in unemployment, as companies in affected industries may eventually be forced to downsize.
As of March, Canada’s inflation rate dropped to 2.3%, from 2.6% in February.
Canada’s real GDP per capita was projected to grow steadily through 2025. However, the combined impact of higher unemployment and a weaker Canadian dollar is likely to drag GDP growth lower. While the current annual GDP growth forecast for 2025 stands at 1.8%, some analysts anticipate a downward revision in the near future.
If the tariff situation worsens significantly, the Bank of Canada may respond with rate cuts of up to 150 bps by the end of 2025, potentially including emergency reductions outside of scheduled meetings. For now, though, we’re maintaining a more cautious forecast of a 75-bps reduction by year-end.
Variable rate forecast 2025
Many borrowers renewing their mortgages in 2025 are showing renewed interest in variable rates. Borrowers are now asking about fixed and variable-rate mortgages equally, after mostly wanting fixed-rate mortgages before. In terms of the rates they carry, the difference between the two is now relatively small—about a quarter of a percentage point (with variable mortgages being the more expensive option).
With global economic conditions showing no sign of stabilizing any time soon, borrowers who are interested in variable rates are betting on further interest rate cuts. Given that variable rates are closely tied to prime rates, variable mortgages may drop by another 75 bps by the end of 2025. That would equal a total decrease of 1.25%. Here's what that would look like:
Big Six banks | Current 5-year closed variable rates (special offer) | Projected 5-year closed variable rates (special offer) |
|---|---|---|
TD | 4.89% | 4.14% |
CIBC | 4.65% | 3.90% |
RBC | 4.55% | 3.80% |
BMO | 4.55% | 3.80% |
Scotiabank | 5.40%* | 4.65% |
National Bank | 4.45% | 3.70% |
*Posted rate, not a special rate
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.
Fixed rate forecast 2025
Unlike variable rates, fixed-rate mortgage interest rates are primarily influenced by government bond yields. This connection provides borrowers with the stability of consistent payments toward both interest and principal.
The ongoing U.S.-Canada trade war has introduced significant economic uncertainty, with bond yields expected to fluctuate by approximately 15 bps in 2025.
For now, mortgage rates are trending downward. However, it’s worth noting that Canada’s 5-year bond yields are fluctuating between 2.6% and 2.9% due to the ongoing political and trade instabilities in the U.S. There’s a chance that the rates could go up if inflation hits before a potential recession, but so far, even with all the fluctuations, the overall trend is downward.
Homebuyers prioritizing stability should consider fixed rates over variable rates. However, the trade-off is that variable rates may eventually fall below fixed rates within the next five years, potentially leading to missed savings for those locked into fixed-rate mortgages.
That said, variable and fixed rates have yet to converge. For the past three years, variable rates have remained higher than fixed rates. This is due to the lingering impact of the Bank of Canada’s previous aggressive rate hikes, which have kept the prime rate elevated. Fixed rates, by contrast, continue to be more affordable. This is largely driven by low bond yields.
If the downward trend continues, fixed rates should drop by about 50 bps by the end of 2025. Here’s what that could look like:
Big Six banks | Current 5-year closed fixed rates (special offer) | Projected 5-year closed fixed rates (special offer) |
|---|---|---|
TD | 4.54% | 4.04% |
CIBC | 4.34% | 3.84% |
RBC | 4.29% | 3.79% |
BMO | 4.59% | 4.09% |
Scotiabank | 6.49% | 5.99% |
National Bank | 4.39% | 3.89% |
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.
Bank of Canada overnight policy rate determinants
Future Bank of Canada interest rate changes will be determined by several key factors.
Inflation/Consumer Price Index (CPI)
- The Bank of Canada’s primary mandate is to maintain price stability by keeping inflation close to its target, typically 2% (the midpoint of a 1-3% target range). If inflation is above target, the Bank may raise the overnight rate to cool the economy. Conversely, if inflation is below target, it may lower the rate to stimulate economic activity. As of March 2025, the inflation rate is 2.3%, which falls within the range.
- Weaker growth paired with rising inflation could compel the Bank to press pause on further rate cuts. In this scenario, the federal government, through its fiscal policy, would have more levers to pull to address a stagnating economy than the central bank.
Economic growth
- The Bank monitors GDP growth to assess the overall health of the economy. If the economy grows too quickly it risks overheating, and the Bank may increase rates. If growth is sluggish or contracting, it may lower rates to encourage borrowing and investment.
- In the final quarter of 2024, the economy grew by 2.6%, a stronger than expected pace. However, the outlook for this year is uncertain, due to continuously changing tariff threats from the U.S. Exports have surged recently, according to the Bank, possibly driven by a desire to get ahead of tariffs. However, consumer and investment sentiment has fallen sharply.
- The Bank’s current growth projection for GDP in 2025 is an average of 1.8% by the end of the year, but the Organization for Economic Co-operation and Development expects it to grow by just 0.7% this year and in 2026. The Bank of Canada will release its updated economic outlook at the next rate-setting announcement on June 4, 2025.
Labour market conditions
- Employment levels, wage growth and labour market participation are key indicators. A tight labour market with rising wages may signal inflationary pressures, prompting a rate hike. High unemployment, on the other hand, may lead to rate cuts to stimulate job creation.
- Previous rate cuts spurred hiring in late 2024, reducing the national unemployment rate to 6.6%, but job growth continued to stall in March 2025. A trade war is expected to hinder any potential recovery.
Global economic growth
- The Bank considers global economic trends, including trade dynamics, commodity prices (especially oil, given Canada’s reliance on energy exports), and the policies of other central banks (e.g., the U.S. Federal Reserve).
- The U.S. economy is slowing, as demonstrated by low bond yields and falling equities, which means could mean less demand for Canadian goods, which are already burdened by heavy tariffs. Volatile oil prices may further limit Canada’s revenue.
- Among alternative trading partners, the eurozone has shown modest growth, while China’s economy has posted strong gains. These dynamics create uncertainty for Canada’s prospects—Chinese growth could boost demand for Canadian commodities, while weak EU growth may dampen global trade.
Exchange rates
- The value of the Canadian dollar affects exports and imports. A strong dollar can hurt exports by making them more expensive, while a weak one can drive up import costs and inflation, so the Bank may adjust rates to influence the exchange rate indirectly.
- Canada’s tariffs on U.S. goods will make them more expensive, reducing demand for American products. This will lower the need for U.S. dollars, which could slightly stabilize the loonie, but overall, tariffs are still harmful to the Canadian currency.
- A weak loonie could also contribute to inflation. In this scenario, the Bank of Canada would need to carefully balance these dynamics, though its primary focus would likely remain on supporting economic growth.
Household financial stability
- High levels of household debt or risks to the financial system may influence rate decisions. The Bank may raise rates to curb excessive borrowing or lower them to prevent financial instability.
- A key event that economists are monitoring is the substantial number of mortgages set to renew in 2025. While some anticipated a renewal crisis this year, downward-trending interest rates, a subdued spring and summer housing market, and adjustments to the mortgage stress test appear to have mitigated that risk for now.
- Homeowners who purchased properties during the pandemic will still face higher renewal rates. According to the Canadian Mortgage and Housing Corporation’s fall mortgage report, 85% of mortgages up for renewal this year were taken out when the Bank’s rate was at or below 1%. The report also highlights a rise in mortgage delinquencies.
- However, Canada may have avoided a more severe crisis, thanks to the ongoing decline in interest rates.
2025 interest rate predictions from experts
Predictions for Canadian mortgage rates vary among experts in periods of relative stability. Making forecasts in 2025 is distinctly more complex. A major factor contributing to this is the unpredictable nature of the U.S. economy and politics (under President Trump).
That said, the general consensus now is that mortgage rates are poised to continue decreasing should inflation remain around 2%. Here's what economists at the leading Canadian financial institutions have to say:
TD Bank: If we go by TD’s latest forecast tables, Canada’s overnight target rate is expected to fall to 2.25%, a reduction of 50 bps from the current rate.
BMO: BMO’s prediction is that after a series of cuts, the Bank of Canada’s target rate should go down to 2.5% by the middle of 2025—though there is a chance of even more aggressive cuts due to tariffs, down to 1.5% by the end of the year.
CIBC: CIBC posits that 40% of mortgage renewals will see lower payments in 2025, with an additional 10% seeing an increase of less than 10%. Its overnight rate prediction remains 2.25% by the end of the year, despite the threat of the trade war.
True North Mortgage: True North Mortgage predicts that variable rates have more room to decline than fixed rates. Variable rates should be lower than fixed at a spread of 0.25% to 1.0% due the heightened risk of change. However, currently, 5-year variable rates are higher than 5-year fixed rates, meaning that variable rates can be reduced even more. Like many other financial institutions, its overnight prediction is 2.25% by the end of 2025.
Bank of Canada 2025 rate announcement dates
January 29 | 3.00% | -0.25% |
March 12 | 2.75% | -0.25% |
April 16 | 2.75% | Hold |
June 4 | TBD | TBD |
July 30 | TBD | TBD |
September 17 | TBD | TBD |
October 29 | TBD | TBD |
December 10 | TBD | TBD |
Frequently asked questions about the changing mortgage market in Canada
What will mortgage rates look like by the end of 2025?
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 March 2025, it’s 2.3%). 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, though the overall trend is downward so far.
Will mortgages in Canada continue to increase in 2025?
Mortgages have been trending downward in 2025 because of the decreasing overnight rate, which currently sits at 2.75% (as of April 2025).
The same applies to home prices, with Canadian home sales sinking 4.8% month-over-month in March 2025, according to Canadian MLS Systems. In fact, national home sales are 20% below the most recent high, recorded in November 2024. Lower sales mean lower prices. Non-seasonally adjusted National Composite MLS Home Price Index (HPI) went down 2.1% year-over-year in March (from $527,500 to $712,200). The actual national average sale price declined 3.7% year-over-year in March, down to $678,331.
The national sales-to-new listings ratio went down to 45.9% in March—from 49.7% in February. The March number for this measure is the lowest it’s been since February 2009.
Overall, monthly payments should be lower, especially for new homebuyers, due to decreasing interest rates and more laxed mortgage measures currently 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%.
That said, homeowners who purchased properties during the pandemic will see higher renewal rates, since they were able to secure their mortgages at record-low rates. So, even though the rates are falling, they are not as low as they were during the pandemic years. For comparison, the overnight rate was 0.25% throughout 2020, 2021 and 2022, which is a far cry from the current overnight rate of 2.75%.
Victor Tran,
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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