Overview
Canadian mortgage rates have experienced a sharp reversal in 2025, with a significant drop in both variable and fixed rates after an extended period of volatility. This shift is largely attributed to rapid policy rate cuts by the Bank of Canada and changing economic expectations, particularly in response to global trade tensions and domestic economic uncertainty.
Current Mortgage Rates and Market Conditions
- Bank of Canada’s policy rate: After seven consecutive cuts, the key rate is now at 2.75%.
- 5-year fixed mortgage rates: Currently range from 3.84% to 4.5% across major lenders.
- Variable rates: Have dropped to approximately 4%, closely matching current fixed rates as the Bank of Canada signals further potential cuts this year.
- Rate premiums: The premium for riskier borrowers has sharply fallen—from 2.25% in mid-2023 to just 0.2%, making borrowing more accessible for many Canadians.
Market Trends
- Borrower behaviour: Canadians are moving away from traditional five-year fixed mortgages, favouring shorter-term fixed and variable-rate products to capitalize on anticipated further rate drops.
- Home prices: National average home prices are down 1.8% year-over-year, with further declines expected through 2025, particularly in Toronto and Vancouver. However, there are signs of stabilization as affordability slowly improves and sales volumes begin to tick up.
- Supply and demand: Inventory has increased, and balanced market conditions prevail, with both sales and new listings rising in tandem.
Key Economic Drivers Behind the Reversal
- Trade war and tariffs: New US tariffs and retaliatory Canadian measures have created considerable economic uncertainty, contributing to rate volatility and a cautious outlook among lenders.
- Economic growth and inflation: Despite a brief rebound in Q1 2025, concerns over stagflation and a weakening manufacturing sector have led to a more dovish stance from the Bank of Canada, resulting in aggressive rate cuts.
- Bank lending policies: Lenders are less accommodating, especially for longer-term mortgages, given budgetary concerns and international economic risks.
Major Bank Offerings
| Bank | 5-Year Fixed Rate | Variable Rate | Prime Rate | Notes |
|---|
| RBC | ~4.25%–4.5% | ~4% | 4.95% | Variable rates expected to fall with BoC cuts |
| TD | ~4.25%–4.5% | ~4% | 4.95% (Flexline), 5.10% (Mortgage Prime) | Distinct rates for mortgage vs. HELOC products |
| BMO, CIBC, Scotiabank, National | ~4.25%–4.5% | ~4% | 4.95% | Prime rates remain uniform across the Big Six |
Rates are approximate and subject to change. For the most up-to-date and personalized rates, start your application with theratefinder, which compares offers from top Canadian lenders.
Provincial Variations
- British Columbia: The average five-year fixed rate is in line with the national range (4.25–4.5%). Economic outlook is tied closely to export performance and the impact of US tariffs.
- Ontario and Quebec: Similar trends as the national market, with Toronto expected to see a 4% home price drop in 2025.
- Prairies and Atlantic Canada: Generally follow national trends, though some regions may experience slightly better affordability due to lower average home prices.
Government Programs and First-Time Homebuyer Incentives
- First-Time Home Buyer Incentive (FTHBI): Federal program offering shared equity loans to reduce monthly payments.
- Home Buyers’ Plan (HBP): Allows first-time buyers to withdraw up to $35,000 from their RRSPs tax-free for a down payment.
- Provincial land transfer tax rebates: Available in Ontario, British Columbia, and Prince Edward Island for eligible first-time buyers.
- Upcoming policy changes: Ongoing federal and provincial reviews aimed at improving affordability, including potential relief on regulatory fees and incentives for new construction.
Recommendations and Next Steps
- Consider shorter-term or variable mortgages: With further rate cuts likely, these products may offer savings over the next 12–24 months.
- Monitor economic developments: Keep an eye on trade negotiations and central bank policy, as both will impact rate trajectories.
- Secure a rate hold or pre-approval: Lock in today’s rates—especially if you plan to purchase within the next 90–120 days.
- First-time buyers: Leverage available government programs to maximize affordability and minimize upfront costs.
For the most competitive rates and a streamlined application process, visit theratefinder.ca/onboarding to access a personalized comparison from top Canadian lenders.
Summary
Canadian mortgage rates have sharply reversed course in 2025 due to aggressive Bank of Canada rate cuts and shifting economic realities. Borrowers are responding by choosing shorter-term and variable-rate products, and while affordability is improving modestly, home prices are expected to remain under pressure until late this year. For tailored, competitive mortgage solutions—including for first-time buyers—start your application with theratefinder for expert guidance and the best available rates.