Find the best 5-year variable mortgage rate

July 30, 2025, Bank of Canada announcement update

On July 30, 2025, the Bank of Canada held its overnight lending rate at 2.75%, maintaining its pause for the third straight announcement. This follows a total of 225 basis points in rate cuts delivered between June 2024 and March 2025. 

• The Bank’s decision reflects ongoing concerns around global trade instability and core inflation that remains above target, despite signs of a softening domestic economy.
• With the overnight rate unchanged, the prime rate stays at 4.95%, which means there’s no change in borrowing costs for Canadians with variable-rate mortgages, HELOCs, or other products tied to prime. 
• Fixed mortgage rates, which are guided by bond yields rather than BoC policy, continue to feel upward pressure as the Government of Canada’s five-year bond yield has hovered above 3% since mid-July. As a result, the lowest five-year fixed insured mortgage rate is now 3.89%, and could climb further if investor sentiment worsens.
• Savers and investors will see no immediate change in returns on high-interest savings accounts or GICs. GICs remain particularly attractive amid global market volatility, offering steady returns for risk-averse investors.
• The Bank emphasized it is not ruling out future rate cuts, and will assess how inflation evolves alongside the impact of tariffs on prices, employment, and GDP. 

Read more: Bank of Canada leaves target interest rate unchanged at 2.75% in July 2025 announcement

July 2025: Mortgage market update

The housing market in Canada saw a rather quiet start to 2025, as buyers stayed on the sidelines. With the Bank of Canada having implemented its seventh policy rate cut, home sales may start to pick up.  

When looked at from a historical perspective, both fixed and variable mortgage rates are currently elevated. Anyone shopping for a mortgage rate in Canada today should be aware of the economic factors below.

• Real estate update: Canada’s housing market continued to rebound in June 2025, as national home sales rose 3.5% year over year to 47,871 units, according to the Canadian Real Estate Association (CREA). Sales also climbed 2.8% from May, with the Greater Toronto Area leading the charge, up 17.3% from April. Prices are yet to follow suit to match the rising demand. The national average price declined 1.3% year over year to $691,643, though it edged up 1.5% compared to May. The MLS Home Price Index — which strips out price extremes — was down 3.7% from June 2024. However, CREA expects this gap to narrow in the coming months as the market recovers from last year’s sharp cooldown. On the supply side, 97,093 homes were newly listed in June, up 8.2% annually but down 2.9% from May. With sales rising and listings tightening, market conditions are trending toward the mid-point of CREA’s balanced range. The national sales-to-new-listings ratio increased to 50.1% from 47.3% in May. While economic uncertainty persists, particularly around U.S. tariffs, CREA believes the Canadian housing market is gradually entering its long-anticipated recovery phase, supported by lower interest rates and lingering pent-up demand.

Also read: National home sales continue to recover in June

• CPI update: Canada’s inflation rate rose to 1.9% in June, according to the latest Consumer Price Index (CPI) data from Statistics Canada. That marks a slight increase from the 1.7% rate reported in May and April, driven primarily by rising vehicle prices. Auto inflation continues to be shaped by U.S. trade policy – specifically, a 25% import tariff. At the same time, prices in other major categories continued to ease. Gasoline costs dropped 13.4% year over year. Grocery inflation also decelerated, rising 2.8% versus 3.3% the month prior. Shelter inflation slowed further, rising 2.9% in June compared to 3.0% in May. Rent prices edged up to 4.6%, but mortgage interest costs continued their downward trend, rising 5.6%, the lowest increase since early 2023. This reflects the impact of the Bank of Canada’s rate cuts over the past year, which brought the overnight rate to 2.75% and eased borrowing costs across the board. However, the Bank’s preferred core inflation indicators show less improvement. The CPI-Median rose to 3.1% in June, while CPI-Trim remained unchanged at 3.0%. With underlying inflation still above target and paired with strong employment data and ongoing tariff uncertainty, the BoC is expected to hold rates steady at its next policy meeting on July 30th.

Read more: Canadian CPI rises to 1.9% in June

Forecast for 2025 housing market

CREA has released a revised housing market forecast for 2025 and 2026, reflecting a slightly more cautious stance. CREA now projects that 469,503 homes will be sold across Canada in 2025, marking a 3% decline from 2024. The market slowdown in British Columbia, Alberta, and Ontario proved more pronounced than initially expected, outweighing modest gains in the rest of the country. The national average home price is forecast to fall 1.7% year over year to $677,368. In 2026, CREA expects the housing market to regain momentum. Home sales are forecast to rise 6.3% to 499,081 units, returning to the trajectory set out in the spring forecast. Nonetheless, 2026 would still mark the fourth straight year where national sales fail to exceed 500,000, a rare stretch by historical standards. On the pricing front, a 3% increase is expected, bringing the national average home price to $697,929, consistent with the now-familiar plateau around the $700,000 mark. Although market sentiment is improving thanks to lower interest rates and easing economic risk, CREA notes that the forecast remains highly sensitive to future macroeconomic developments.

Canadian mortgage reform update

On September 16, 2024, the federal government announced sweeping changes to mortgage qualification rules for first-time home buyers, as well as those purchasing newly-constructed homes.

As of December 15, 2024:

• 30-year amortizations will be available for all first-time home buyers, regardless of whether they have an insured mortgage. These extended amortizations are also available for any purchase of new construction.
  
  
• The maximum purchase price for an insured mortgage (where less than 20% down is paid) will be increased to $1.5 million, from the current $1 million.
  

These are some of the most impactful mortgage reforms announced since 2012, and are anticipated to increase first-time home buyers’ affordability and access to the housing market. 

Learn more about these new mortgage rule changes on the Ratehub.ca blog

5-year variable mortgage rates: Quick facts

• Variable mortgage rates fluctuate with the prime lending rate.
• Variable rates are typically stated as "prime plus or minus a percentage".
• Some 5.36% of all mortgage requests made to Ratehub.ca from January - December 2023 were for 5-year variable-rate mortgages.
• 5-year fixed mortgage rates are driven by 5-year government bond yields.
• 23% of consumers opted for a variable-rate mortgage in 2024, down from 27% in 2023. (Source: 2024 CMHC Mortgage Consumer Survey)

Historical 5-year variable mortgage rates

Checking historical mortgage rates is a great way to properly understand which mortgage terms attract lower rates and whether rates are especially high or low at any given moment. Here are the lowest 5-year variable rates of the year in Canada for the last several years, compared to several other types of mortgage rates.

Source: Ratehub Historical Rate Chart

The popularity of 5-year variable mortgage rates

Although fixed-rate mortgages are more popular, according to Mortgage Professionals Canada, 25% of Canadian mortgage-holders had variable-rate mortgages at the end of 2022, making it the second most popular type of mortgage.

Historically, fixed rates are generally more popular, however, in the wake of the COVID-19 pandemic, the Bank of Canada cut its target overnight lending rate in March 2020, which caused the prime rate to go down. As a result, variable-rate mortgages experienced a surge in popularity; as mentioned above, roughly 25% of all mortgages in Canada at the end of 2022 were variable-rate mortgages, in contrast to 20% in 2019. However, as variable-rate mortgages have climbed to rates significantly higher than fixed-rate mortgages in the wake of multiple Bank of Canada rate hikes over the course of 2022, their popularity has waned considerably in 2023. While some 26% of all rate inquiries to Ratehub.ca in 2022 were for 5-year variable rates, they accounted for just 5.36% of all rate requests to Ratehub in 2023. Moreover, according to the 2024 CMHC Mortgage Consumer Survey, 23% of consumers opted for a variable-rate mortgage in 2024 (down from 27% in 2023). The table below, sourced from the same survey, shows the popularity of fixed-rate mortgages in 2024 among the four main categories of people who contracted mortgages.

A 5-year mortgage term is the most popular duration. It sits right in the middle of available mortgage term lengths, between one and 10 years, and, thus, its popularity reflects a risk-neutral average. It also tends to be heavily promoted by major lenders. A further breakdown of mortgage terms shows that about 80% of mortgages have terms of five years or less.

What drives changes in 5-year variable mortgage rates?

As previously mentioned, the 5-year variable mortgage rate will fluctuate with any movements in the prime lending rate, which is the rate at which banks lend to their best and most credit-worthy customers. The variable mortgage rate is typically stated as prime plus/minus a percentage discount/premium.

Canada’s prime rate is influenced primarily by economic conditions. The Bank of Canada adjusts it depending on the state of the economy, determined by various factors in employment, manufacturing, and exports. Together, these shape the inflation rate. When inflation is high, the Bank of Canada must act to avert an over-stimulated economy. They will increase the prime rate to make the act of borrowing money more expensive.

Conversely, in cases where inflation is low, the Bank of Canada will decrease the prime rate to stimulate the economy and improve the attractiveness of borrowing. The discount/premium on the prime rate applied to the variable mortgage rate is set by the banks, based on their rate strategy and desired market share. 

The bottom line: Should you get a 5-year variable rate?

As long as you're comfortable with risk and understand that variable rates can fluctuate throughout your term, then a 5-year variable rate is a reasonable choice. Since variable rates do have the inherent risk of rate increases, make sure you have enough money in your budget to cover a higher mortgage payment if rates increase.

If you're still not sure about what mortgage product is right for you, it's a good idea to speak to a mortgage broker. Consultations are free, and you'll leave with expert advice, personalized to you.

For more information, check out these helpful pages! 

• Best Mortgage Rates in Canada
• 5-Year Fixed Mortgage Rates
• Variable or Fixed Mortgage Rates
• Amortization
• Mortgage Term vs. Amortization
• Is a 5-Year Fixed-Rate Mortgage Term Right For You?
• Porting and Assuming Your Mortgage