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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 | 4.69% | 4.19% | 4.19% | 6.15% |
5.49%
|
| 2-year fixed rate | 4.09% | 3.99% | 3.99% | 4.70% |
4.79%
|
| 3-year fixed rate | 3.79% | 3.79% | 3.79% | 4.24% |
4.39%
|
| 4-year fixed rate | 4.04% | 3.99% | 3.99% | 4.44% |
4.29%
|
| 5-year fixed rate | 3.64% | 3.89% | 3.64% | 3.64% |
3.99%
|
| 7-year fixed rate | 4.39% | 4.19% | 4.19% | 5.79% |
5.00%
|
| 10-year fixed rate | 5.04% | 4.44% | 4.44% | 5.84% |
6.79%
|
| 3-year variable rate | 4.15% | 4.30% | 4.30% | 4.45% |
6.35%
|
| 5-year variable rate | 3.95% | 3.95% | 3.95% | 4.00% |
4.25%
|
| 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 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%
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.
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).
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 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.
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.
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.
Future Bank of Canada interest rate changes will be determined by several key factors.
Inflation/Consumer Price Index (CPI)
Economic growth
Labour market conditions
Global economic growth
Exchange rates
Household financial stability
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%.
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.
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 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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