Find the best mortgage rates in Canada

May 2025: Mortgage market update

The Canadian housing market slowed significantly in early 2025 as tariff concerns and economic uncertainty weighed on buyer confidence. However, the Bank of Canada has now implemented seven consecutive rate cuts, bringing its benchmark rate to 2.75%. Despite these rate reductions, economic uncertainty remains, and mortgage shoppers should stay informed about key factors shaping the market.

• Real estate update: In April 2025, Canadian home sales remained subdued as buyers continued to stay on the sidelines. According to the Canadian Real Estate Association (CREA), national home sales totaled 44,300 units — down 9.8% compared to April 2024, and virtually unchanged from March, which had already marked a 16-year low. CREA’s Senior Economist, Shaun Cathcart, noted that while the steep monthly declines seen earlier in the year have paused, the market remains quiet, with tariff-related economic uncertainty now replacing high interest rates as the main deterrent to buyer activity. New listings dipped 1% month over month, but were up 1.2% compared to last April, with 94,234 properties added to the market. The national sales-to-new listings ratio (SNLR) ticked up slightly to 46.8% from 46.4% in March, still hovering just above buyer’s market territory. The national average home price fell to $679,866 in April, a 3.9% drop from the previous year. CREA’s MLS Home Price Index, which better reflects typical home prices by filtering out extremes, declined 1.2% month over month and 3.6% annually. Looking ahead, all eyes are now on upcoming inflation and GDP data, which will influence whether more borrowing cost relief is likely in the coming months.

  Read more: April Canadian home sales flat as buyers stick to the sidelines

• CPI update: According to Statistics Canada’s latest Consumer Price Index (CPI) report, Canada’s annual inflation rate rose to 1.7% year over year in April, down slightly from 2.3% in March. This lower reading was primarily due to a steep decline in energy prices. Gasoline prices fell by 18.1% compared to the previous year, driven by lower global oil demand, reduced trade activity due to tariffs, and increased oil supply from OPEC. However, excluding energy, inflation would have come in at a growth rate of 2.9%, pointing to persistent cost pressures elsewhere in the economy. Food costs contributed to this rise, with grocery store prices climbing 3.8%. Shelter costs remained a significant contributor to inflation, rising 3.4%, driven in part by a 6.8% increase in mortgage interest costs. However, this marks the twentieth consecutive monthly decline in mortgage cost growth, reflecting the ongoing impact of Bank of Canada’s rate cuts from June 2024 to March 2025. Despite the lower headline figure, core inflation measures remain above the central bank’s target, with the CPI-median and CPI-trim rising to 3.2% and 3.1%, respectively. This divergence between headline and core inflation may complicate the Bank of Canada’s upcoming policy rate announcement on June 4th.
  
  Read more- Canadian CPI comes in at 1.7% in April as energy prices plunge

Canada housing market forecast for 2025

The Canadian Real Estate Association (CREA) has updated its 2025 and 2026 forecasts for home sales and average home prices in Canada. The latest forecast, marking the largest revision in quarterly forecasts since the 2008-2009 financial crisis, reflects a more cautious outlook. In 2025, approximately 482,673 residential properties are expected to change hands across Canada, representing a minimal decline of 0.02% from 2024. This is a sharp downward revision from the 8.6% growth originally anticipated. The national average home price is projected to fall by 0.3% to $687,898 in 2025, about $30,000 lower than previously forecasted.  Looking ahead to 2026, CREA expects a modest rebound in sales, forecasting a 2.9% increase to 496,487 properties sold. However, this figure still falls short of the half-million mark for the fourth consecutive year. The national average home price is expected to rise slightly by 1.2%, reaching $696,074 in 2026. Given the ongoing volatility and the uncertain direction of interest rates, CREA’s forecast remains subject to significant uncertainty. 

Highlights from the Bank of Canada’s April 16, 2025 announcement

On April 16, 2025, the Bank of Canada decided to hold its benchmark interest rate at 2.75%, halting the sequence of rate cuts that began in June 2024. This decision marked a significant shift, as the Bank adjusts to uncertainty from the ongoing US tariff narrative.

• The Bank's decision was shaped by persistent inflationary pressures and ongoing tariff concerns. While March’s inflation reading dropped to 2.3%, it remains above the Bank’s target. With economic conditions still highly unpredictable, the Bank opted to focus on controlling inflation and maintaining price stability.

• For Canadian borrowers, the BoC’s hold means no immediate change to variable-rate mortgages, as these are directly tied to the prime rate, which will continue to remain at 4.95%. 
• Fixed mortgage rates, which are influenced by bond yields, have experienced some fluctuation. After dropping to a three-year low of 2.52% earlier in April, bond yields have rebounded back to the 2.7% range, with the lowest available five-year fixed mortgage rate currently at 3.79% (3.74% in Quebec).
• Savers with products tied to prime, such as high-interest savings accounts (HISAs) and Guaranteed Investment Certificates (GICs), will see no changes in their returns.
• The BoC indicated that further rate changes could be considered depending on how global trade conditions unfold.

The impact of U.S. tariffs on Canadian mortgages

The U.S. has introduced new tariffs on imports, creating uncertainty in global markets, including Canada. On April 2, 2025, U.S. President Donald Trump announced a series of tariffs, including a 25% levy on goods not covered under the Canada-United-States-Mexico Agreement (CUSMA), steel and aluminum products, and foreign cars and parts. While Canada was exempt from the 50% reciprocal tariffs the U.S. imposed on other countries, it still faces these new trade barriers. 

This escalation in trade tensions has sent global markets into a downward spiral. The bond markets have also been affected, with the U.S. 10-year Treasury yield dropping significantly. Canada’s 5-year bond yields also fell to the 2.488% range as of April 3, 2025. The drop in bond yields is largely driven by growing fears of a recession, both in Canada and the U.S., coupled with rising inflation expectations. For borrowers, this means better fixed mortgage rates, with rates as low as 3.74% for insured mortgages and 3.99% for uninsured ones.

While economists initially expected the Bank of Canada (BoC) to cut its key interest rate in response to the tariffs, the BoC has remained cautious, and may choose to hold rates in its upcoming April 16 announcement. The central bank has emphasized that it will continue to monitor the global economic situation and adjust its policies as needed.

However, despite the drop in mortgage rates, the Canadian housing market is facing a slowdown. Fears of further tariff impacts have dampened buyer activity, with February seeing a 10.4% decrease in home sales compared to the previous year. 

Also read: How could 25% US tariffs impact Canadian mortgage rates?

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

Factors that can affect your mortgage rate in Canada

It’s important to understand that the best mortgage rate you qualify for may change depending on your unique borrowing profile. Here are some of the factors that influence what mortgage rate you qualify for:

The type of mortgage: If your mortgage is for a refinance, rather than a purchase or renewal, you’ll be eligible for higher rates. For individuals with an existing mortgage who have good credit and more than 20% equity in their homes, in addition to refinancing, you can also explore a home equity line of credit (HELOC).

Your down payment: If you’re purchasing a home and your down payment is less than 20% of the purchase price and the value of the home you are purchasing is less than $1 million, you’ll be required to purchase mortgage default insurance (sometimes known as CMHC insurance). This insurance is added to your mortgage amount and, while it will cost you money, it will result in a lower mortgage rate as your mortgage is less risky for your lender. If you’re renewing your mortgage, in order to be eligible for the lowest mortgage rates you would have needed to purchase CMHC insurance on the original mortgage. 

Your intended use of the property: Your mortgage rate will be higher if you plan to rent your property out vs. live in it as your primary residence.

Your amortization period: Insurable mortgages (i.e. mortgages for homes valued at less than $1 million with a down payment of less than 20% of the purchase price) in Canada have a maximum amortization period of 25 years. Regardless of the price of your home, if you make a down payment of at least 20%, you are able to access a mortgage that allows a longer amortization period, such as a 30-year period. While longer amortization periods will usually result in a lower monthly payment, they can come with a slightly higher interest rate. Moreover, by taking longer to pay back the mortgage, you will pay more in interest overall than you would with a shorter amortization period.

How to choose between a fixed or variable mortgage rate in Canada

Variable vs. fixed mortgage rates

The difference between fixed and variable mortgage rates is whether or not they will change over the term of your mortgage. Fixed rates will stay the same over the course of your mortgage term (usually 5 years), while variable rates will change alongside changes in your lender’s prime rate.

Fixed mortgage rates:

Fixed mortgage rates are a historically popular option, with 5-year fixed mortgage rates accounting for 80% of all mortgage requests made on Ratehub.ca from January to December 2023. Moreover, according to the 2024 CMHC Mortgage Consumer Survey, 69% of all mortgages contracted in 2024 were fixed-rate mortgages. The benefit of a fixed mortgage is that you are protected against interest rate fluctuations, so your regular payments stay constant over the duration of your term, regardless of what happens in the market. A fixed rate mortgage is ideal for you if you have a low appetite for risk. You’ll know how much you’ll be paying monthly right from the outset and not have to monitor interest rates.

Variable mortgage rates:

Variable mortgage rates are typically lower than fixed rates but can vary over the duration of your term. Variable mortgages are prone to market behaviour (via the prime rate) which affects your payments. That means your payment amounts can change over time. Variable rates remained substantially lower than fixed rates throughout 2021 and into 2022, leading a large number of buyers to opt for 5-year variable-rate mortgages. However, as variable-rate mortgages climbed to rates that are higher than fixed-rate mortgages over the course of ten rate hikes between March 2022 and July 2023, their popularity has substantially diminished. According to the 2024 CMHC Mortgage Consumer Survey, 23% of mortgages contracted during 2024 were variable-rate mortgages (down from 27% in 2023). 

While variable rates are generally lower, they do fluctuate and can be viewed as more risky when compared to fixed rates. Moreover, variable rates have actually been higher than fixed rates since the end of 2022. That said, variable mortgage rates have some key advantages you should know about:

• You can convert a variable rate to a fixed rate at any time without a penalty as long as you stay with your original mortgage lender.
• Breaking a variable rate mortgage is substantially less expensive than breaking a fixed rate mortgage. To estimate the cost of breaking your mortgage, our mortgage penalty calculator is a useful tool. 

According to York University Professor Moshe Milevsky’s landmark 2001 study, historically, over 90% of Canadians who have maintained a variable mortgage rate throughout their entire mortgage term have paid less in interest than those who have stuck to a fixed rate.

How to select the term for your mortgage rate

Choosing between a short-term mortgage or a long-term mortgage can also affect your interest rate. A short-term mortgage generally offers a lower rate, and, as it requires more frequent renewal, you can benefit from lower interest rates when you renew, if rates stay low at your renewal. Long-term mortgages, on the other hand, offer stability, as you won’t need to renew it often. However, long-term mortgage holders may not be able to take advantage of lower interest rates if the market fluctuates. 

Open vs. closed mortgages

If you’re wondering whether to get an open or closed mortgage, the answer is, while an open mortgage may make sense in certain circumstances, the overwhelming majority of Canadians opt for a closed mortgage. While open mortgages have extra flexibility that you might need, closed mortgages are by far the more popular choice not only due to their lower rates, but also because most home buyers do not intend to pay off their mortgages in the short term. Moreover, fixed-rate open mortgages do not exist and variable-rate mortgages are very rare. The most common type of open mortgage is the Home Equity Line of Credit (HELOC). Below are some quick facts about the differences between open and closed mortgages, and you can also find more detailed information on our blog about open vs. closed mortgages.

Closed mortgages:

Closed mortgages have lower rates compared to open mortgages. Closed mortgages can come in fixed and variable form, but place restrictions on the amount of principal you can pay down each year. If you pay off the entire principal in a closed mortgage before the set term, you will face a prepayment penalty, which is normally a 3-month interest charge.

Open mortgages:

Open mortgages allow you to pay off your entire mortgage balance at any time throughout the term. The drawback is that you pay a premium for that option in the form of higher rates. You might opt for an open mortgage if you are planning to move in the near future, or if you’re expecting a lump sum of money through an inheritance or bonus that would allow you to pay more of your mortgage off.

How do I qualify for a mortgage in Canada?

While it’s important to think about qualifying for the best rates, you should also give some thought to the basics that you’ll need to qualify and get approved for your mortgage. To qualify for a mortgage, here are some of the most important things that prospective lenders will want to see.  

A good credit score - You should have a credit score of 680 or higher to qualify for the best mortgage rates, but to qualify for a mortgage at all, you’ll need a credit score of at least 560. In addition to looking at your credit score, prospective lenders will also consider any derogatory information from your credit report, such as any missed payments (particularly if they have gone to collections). If you have bad credit, generally defined as a credit score of less than 660, you are unlikely to qualify for the best mortgage rates, and instead you’ll need to use a sub-prime mortgage lender like Equitable Bank or Home Trust. If your credit score is even less than 600, you will most probably need to use a private lender like WealthBridge. Sub-prime mortgage lenders are happy to work with people with a poor credit history, but they will charge higher mortgage rates. It's a good idea to have a detailed understanding of how your credit score affects your ability to obtain a mortgage.

Proof of income - You’ll also need to provide proof of income in the form of pay stubs and/or tax documents like your Notice of Assessment (NOA). Keep in mind that if you recently started a new job, even with proof of income, many lenders will want to see that you’ve held the position for at least a year. 

How the stress test impacts mortgage qualification

In Canada, anyone applying for a new mortgage loan must pass the mortgage stress test. The purpose of the stress test is to ensure the borrower could still manage to make their mortgage payments in the case that interest rates rise over the course of their term. The criteria for the stress test is a benchmark rate of 5.25% or the borrower’s contract rate plus 2% – whichever is higher. For example, if your lender offers you a mortgage rate of 5%, you’ll need to prove you could afford to make your payments at 7% in order to pass the test and qualify for your mortgage loan.

The standards for the mortgage stress test are upheld by the Office of the Superintendent of Financial Institutions (OSFI), Canada’s federal banking regulator, for low-ratio, uninsured mortgages. The criteria for high-ratio and insured mortgages is governed by the federal Department of Finance, though they follow exactly the standards put in place by OSFI.

All mortgage borrowers must be stress tested, with two exceptions:

• Borrowers who are renewing their mortgage term at their original lender often are not re-stress tested.
  
• Borrowers with high-ratio, insured mortgages switching to another lender at renewal may not be stress tested, as long as the original terms of their loan and amortization do not change.

Read more about Canada’s mortgage stress test:

• What changes are in store for Canada’s stress test?
• How to stress test your mortgage

Historical Canada mortgage rates

Looking at historical mortgage rates in Canada is a good way to understand which types of mortgage attract higher rates. They also make it easier to understand whether we’re currently in a low or higher rate environment, relatively speaking.

Here are some of the lowest Canada mortgage rates of the year for different types of mortgages over the past five years.

Source: Ratehub Historical Rate Chart

Is it worth working with a mortgage broker?

First, what exactly is a mortgage broker? Independent mortgage brokers are licensed mortgage specialists who have access to multiple lenders and mortgage rates. They essentially negotiate the lowest rate for you, and because they acquire high quantities of mortgage products, mortgage brokers can pass volume discounts directly to you. There are advantages to getting a mortgage directly from a lender as well as getting a mortgage through a broker, but there are differences between going with a bank vs. a mortgage broker. While going directly to your current bank lets you consolidate your financial products, using a broker allows you to shop around quickly and easily, at no cost to you.

Luckily, you don’t need to choose one or the other. You can speak to multiple banks and use a mortgage broker if you want to. Ratehub.ca is a great place to start, as we compare the best mortgage rates in Canada from multiple lenders. Once you’ve compared your options, we can put you in contact with your chosen provider.