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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 | 5.04% | 5.15% | 5.15% | 6.63% |
6.29%
|
| 2-year fixed rate | 4.74% | 4.79% | 4.74% | 4.74% |
5.59%
|
| 3-year fixed rate | 4.14% | 4.14% | 4.14% | 4.49% |
4.89%
|
| 4-year fixed rate | 4.29% | 4.14% | 4.14% | 4.49% |
4.74%
|
| 5-year fixed rate | 3.99% | 3.99% | 3.99% | 4.14% |
4.59%
|
| 7-year fixed rate | 4.44% | 4.39% | 4.39% | 5.90% |
5.50%
|
| 10-year fixed rate | 5.09% | 5.29% | 5.29% | 5.80% |
7.14%
|
| 3-year variable rate | 4.60% | 4.70% | 4.60% | 4.60% |
6.85%
|
| 5-year variable rate | 4.30% | 4.50% | 4.30% | 4.30% |
4.65%
|
| 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 Dec. 11, 2024:
Bank of Canada Overnight Target Rate: 3.25% (a decline of 50 bps)
5-year Government of Canada benchmark bond yield: 2.89%
Prime Rate: 5.45%
5-year Fixed (Insured)*: 3.99%
5-year Fixed (Uninsured)*: 4.14%
5-year Variable (Insured)*: 4.30%
5-year Variable (Uninsured)*: 4.30%
*Lowest nationally available mortgage rates.
Total Consumer Price Index (Inflation): 1.90%
National Unemployment Rate: 6.8%
Real GDP by expenditure (Q3 2024): +0.3%
Real GDP per capita (Q3 2024): -0.4%
With mortgage rates falling significantly over the course of 2024, alongside the inflation rate, we expect this downward trend to continue in 2025.
Historically, Canadian mortgage rates have hovered at around 3%, so that’s where things are expected to land in the long term – though it’s doubtful we’ll get there in 2025. That said, if the current trajectory remains the same, there’s a good chance the rates will go from around 5% to 4% in 2025 (prime rates and variable rates, specifically).
More on that below.
As of December 11, 2024, the Bank of Canada’s overnight target rate (also known as policy rate, key interest rate or target rate) is at 3.25% – a reduction of 50 basis points (bps) from the previous rate of 3.75%, which was set on October 23, 2024.
The prime rate from Canada’s Bix Six banks (TD, RBC, CIBC, BMO, Scotiabank and National Bank) currently sits at 5.45%, having gone down 50 bps from the rate set in October 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. At the height of the pandemic (from 2020 to 2021), the prime rate sat at an impressive 2.45% (coinciding with Bank of Canada’s rate of 0.25%), which is the lowest it’s been in over 10 years.
However, 2021 also saw a steep rise in inflation. To combat it, the Bank of Canada increased its policy rate by 25 bps in March 2022 – to 0.50%. The rate has since gone up 10 times, peaking in July 2023 at 5.00%, with the prime rate following in its footsteps and peaking at 7.20%.
The rates stayed the same until the Bank of Canada dropped its rate by 25 bps to 4.75%, with the prime rate going down to 6.95%, respectively. By then, the inflation rate had dropped to below 3% – from the peak of 8.1% in June 2022.
The decline continued throughout the rest of 2024, and so far, is projected to continue going into 2025.
Will the prime rate reach the low of 2.45%, seen in 2020 and 2021? This is unlikely – especially not in 2025. However, there is a good chance it might go down another 100 bps by the end of 2025 – to 4.45%. This should hold true if the inflation rate remains at around 2%-3% in 2025 (2% is the expected baseline in a healthy economy).
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 down 50 bps. There were exceptions in the past, however, when lenders didn’t adjust their prime rates be 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, 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 |
5.19% |
4.19% |
|
CIBC |
4.95% |
3.95% |
|
RBC |
4.95% |
3.95% |
|
BMO |
4.95% |
3.95% |
|
Scotiabank |
5.90% |
4.90% |
|
National Bank |
4.95% |
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.
There was a brief spike in bond yields in November 2024, but the overall trend has been downward, and the same should be expected in 2025. That said, some of the biggest declines have already occurred – with the 5-year fixed rates dropping by over 100 bps – so don’t expect any big changes in 2025.
Based on what the economists are saying right now, 5-year fixed rates might see a slight drop by the end of 2025. We’d place the drop at around 25 to 50 bps. 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 |
5.09% |
4.59% |
|
CIBC |
4.89% |
4.39% |
|
RBC |
4.89% |
4.39% |
|
BMO |
4.94% |
4.44% |
|
Scotiabank |
6.49% |
5.99% |
|
National Bank |
6.39% |
5.89% |
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.
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 cut its target rate down to 3.25% on December 11, 2024. The prime rate is now 5.45% as a result. This marks the last rate announcement (and cuts) in 2024. If the Bank of Canada intends further rate cuts, they will occur in 2025.
The Bank of Canada’s 2025 rate announcement schedule currently looks like this:
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.’
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.
Though new mortgage loans will increase alongside real estate prices, according to the MLS Home Price Index report from December 2024, the increase should be gradual.
Monthly payments, however, should be lower due to decreasing interest rates and 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 2025, mortgage should be both more affordable and obtainable, especially for new homebuyers. That said, new mortgage loan amounts will be higher due to higher interest rates associated with protracted mortgages and higher borrowing amounts.
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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