Canadian Mortgage Rate Forecast 2025
Learn about 2025 interest rate trends that impact your mortgage rates.
Today's Headline
BoC keeps policy rate steady as US tariffs and trade war cloud economic outlook
The Bank of Canada holds its policy interest rate steady at 2.75% today as the Bank gains more clarity about the path forward about U.S. tariffs and its impacts.
Read moreApr.16.2025
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 04:57 on Apr 21, 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% | 5.49% |
5.49%
|
| 2-years fixed rate | 4.09% | 3.89% | 3.89% | 4.70% |
4.79%
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| 3-years fixed rate | 3.79% | 3.79% | 3.79% | 4.09% |
4.39%
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| 4-years fixed rate | 3.99% | 3.99% | 3.99% | 4.44% |
4.29%
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| 5-years fixed rate | 3.74% | 3.84% | 3.89% | 3.84% |
3.99%
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| 7-years fixed rate | 4.39% | 3.99% | 3.99% | 5.15% |
5.00%
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| 10-years fixed rate | 5.04% | 4.34% | 4.34% | 5.25% |
6.09%
|
| 3-years variable rate | 4.15% | 4.30% | 4.30% | 4.45% |
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
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Content Manager
Key Rates and Economic Numbers
These values are as of Mar. 31, 2025:
Bank of Canada Overnight Target Rate: 2.75% (a decline of 25 bps)
5-year Government of Canada benchmark bond yield: 2.66%
Prime Rate: 4.95%
5-Year Fixed (Insured)*: 3.64%
5-Year Fixed (Uninsured)*: 3.64%
5-Year Variable (Insured)*: 3.95% (Prime-1.00%)
5-Year Variable (Uninsured)*: 4.0% (Prime-0.95%)
*Lowest nationally available mortgage rates.
Total Consumer Price Index (Inflation): 2.6%
National Unemployment Rate: 6.6%
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 25% tariffs on aluminum and steel—along with Canada’s retaliatory counter-tariffs—will influence Canadian mortgage rates. Will rates rise, stabilize, or continue their downward trajectory?
At this stage, there are no definitive answers, particularly given the unpredictability of the president’s policy decisions. However, 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 March 12, 2025, the Bank of Canada dropped its overnight target rate (also known as policy rate, key interest rate, or simply as the target rate) to 2.75%: 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 sit at 4.95%, having gone down 25 bps from the rate set in January. 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).
- 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 March rate cut, the Bank hinted at a concerning scenario: one where economic growth slows or stalls while inflation stays high, partly due to tariff-driven price increases.
To manage these challenges, the Bank is relying on monetary policy to carefully balance these competing pressures.
My own personal projections align with economists at the Bank of Montreal, who anticipate rate cuts of 25 basis points at each of the upcoming meetings. However, this outlook is subject to change based on developments in the ongoing tariff situation.
There’s always the possibility the Bank could make emergency or larger-than-normal rate cuts to limit the damage from tariffs. But if price inflation starts to creep up again, it may force the bank to pause on making further cuts.
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 rose to 2.6% in February, an increase of 37% from January's reporting (1.9%).
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 basis points by the end of the 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 | 4.50% | 3.75% |
RBC | 4.58% | 3.83% |
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 basis points in 2025.
For now, mortgage rates are trending downward. Bond yields have dropped this year due to economic uncertainty and lower interest rates, which have made bonds more appealing to investors, putting additional downward pressure on yields. After the Bank of Canada’s March interest rate cut, fixed-rate mortgages could fall even further, with rates potentially reaching the 3% range by the end of the year.
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.
With that in mind, here’s what the currently advertised 5-year fixed rates might look like by the end of 2025 should the Bank of Canada cut the key interest rate by an additional 75 bps:
Big Six banks | Current 5-year closed fixed rates (special offer) | Projected 5-year closed fixed rates (special offer) |
|---|---|---|
TD | 4.59% | 3.84% |
CIBC | 4.34% | 3.59% |
RBC | 4.29% | 3.54% |
BMO | 4.59% | 3.99% |
Scotiabank | 6.49% | 5.74% |
National Bank | 4.39% | 3.64% |
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.
- If markets expect higher inflation in 2025, the Bank may act pre-emptively to maintain credibility and anchor inflation expectations. In February, the Consumer Price Index rose to 2.6%. This is still within the target range, but the Bank will be closely watching this metric to determine whether inflation becomes entrenched.
- Weaker growth paired with rising inflation could compel it 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 April 16.
Labour market conditions
- Employment levels, wage growth, and labor market participation are key indicators. A tight labor 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 stalled in February, according to the Bank. 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 President Trump's unpredictable nature.
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: Resident economist James Orlando predicts more rate cuts in 2025, expecting the Bank of Canada’s target rate to be reduced to 2% by the end of the year. Though tariffs will negatively impact Canada’s economic growth, rates should continue to go down.
BMO: Three more cuts of 25 bps over the next three meetings are on the way, bringing the Bank of Canada’s target rate down to 2% by the middle of 2025. There’s a chance it will fall even lower than current market expectations, potentially reaching 1.5% by year-end.3
CIBC: Nearly half of mortgage renewals (40%) will see lower payments in 2025, with an additional 10% seeing an increase of less than 10%. The bank predicts the target rate will reach 2.25% by the end of the year,even in the absence of trade war (which could lead to an even lower rate).
True North Mortgage: 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, 5-year variable rates are higher than 5-year fixed rates, meaning that variable rates can be reduced even more. Like many financial institutions, the brokerage predicts that thetarget rate could reach 2.25% by the end of 2025, possibly even 1.5%.
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. (In February, inflation reached 2.6%).
Many experts predict that by the end of the year, the target rate will go down by at least 50 or 75 basis points to 2%. This was poised to happen despite the U.S.-Canada trade war – though a prolonged trade war could lead to an even lower rate.
As a result, the prime rate could go down to 4.45%. Variable rates, which follow the prime rate, will see similar reductions.
Fixed mortgage rates follow government bond yields, which have been trending downward overall. This means that 2025 could bring more reductions to fixed rate mortgages.
Will mortgages in Canada continue to increase in 2025?
The outlook for the spring housing market was much rosier before the U.S.'s threats of flat-rate tariffs.
As it seeks to reduce reliance on the U.S., Canada’s economy is undergoing a major restructuring, leading to a sharp drop in consumer sentiment. With growing job insecurity, many prospective buyers are delaying home purchases.
According to the Canadian Real Estate Association, February 2025 recorded the lowest home sales since November 2023 and the steepest month-over-month decline since May 2022, when the Bank of Canada began aggressive rate hikes to combat inflation.
While the national market showed signs of balancing late last year—evidenced by a sales-to-new listings ratio of 56.9% in December—home sales have since declined sharply, particularly in the Greater Toronto Area.
New listings fell 12.7% month-over-month, and the national average home price dropped 3.3% year-over-year to $668,097, with Toronto experiencing the most significant price declines.
Falling mortgage rates combined with measures like the introduction of 30-year mortgages for first-time buyers and relaxed stress test rules are unlikely to offset the uncertainty caused by harsh tariffs, which are expected to keep many prospective buyers on the sidelines this spring.
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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