Find the best 5-year variable mortgage rate

May 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: According to the Canadian Real Estate Association (CREA), Canada’s housing market showed little improvement in April 2025. National sales totalled 44,300 units — down 9.8% from April 2024 and essentially flat from March. The key factor holding buyers back is no longer high interest rates, but growing concern over tariffs, rising inflation, and the risk of recession. On the supply side, 94,234 new listings hit the market, marking a 1% drop from March but a 1.2% increase year over year. The sales-to-new listings ratio rose slightly to 46.8%, signalling a balanced market. CREA defines a balanced market as one where the sales-to-new listings ratio falls between 45% and 65%. The national months of inventory remained stable at 5.1, consistent with long-term trends. Home prices continued to slide, with the national average price falling 3.9% annually to $679,866. The MLS Home Price Index, which filters out extreme price points, also declined by 1.2% from March and 3.6% compared to last year. Looking ahead, economists expect the Bank of Canada to lower interest rates twice this year, but persistent inflation could complicate this path of lower variable rates. Fixed mortgage rates are holding steady, as bond yields remain elevated. Any signs of recovery may depend on upcoming inflation and GDP data, and whether they give the Bank of Canada room to ease borrowing costs.

  Read more: April Canadian home sales flat as buyers stick to the sidelines
  
  
• CPI update: In March 2025, Canada’s annual inflation rate dropped to 2.3%, a decrease from 2.6% in February, according to the latest Consumer Price Index (CPI) report from Statistics Canada. This unexpected decline occurred despite the end of the winter GST tax holiday, which had temporarily eased prices in certain categories. Despite these price increases returning, the overall CPI was lower than anticipated, largely due to decreases in gas and travel prices. Gasoline prices dropped by 1.6%, air travel costs saw a significant drop of 12%, and travel tour prices decreased by 4.7%. However, food prices continued to rise, with grocery store and restaurant costs both increasing by 3.2%. Shelter costs showed a moderate increase of 3.9%, driven by a 7.9% rise in mortgage interest costs, which reflected the Bank of Canada's interest rate cuts since June 2024, easing the burden on borrowers. Rent prices continued to climb, up 5.1%.

Read more- March CPI comes in surprisingly low at 2.3%

Forecast for 2025 housing market

CREA has updated its forecasts for 2025 and 2026, revising expectations for both home sales and average home prices. The economic fallout from the U.S. tariffs has resulted in CREA making its largest forecast revision since the 2008-2009 financial crisis. For 2025, CREA now expects 482,673 residential properties to be sold, reflecting a minor decline of 0.02% from 2024. This represents a significant downward revision from the initially predicted 8.6% growth. The national average home price is forecast to decrease slightly by 0.3%, bringing it to $687,898, which is $30,000 lower than the previous forecast. Looking ahead to 2026, CREA expects home sales to improve by 2.9%, with 496,487 properties projected to be sold. However, sales are still not expected to surpass the 500,000 mark for the fourth consecutive year. The national average home price is expected to rise slightly by 1.2% to $696,074 in 2026. Due to ongoing economic volatility and uncertainty about interest rate movements, CREA’s forecast remains highly tentative.

April 16, 2025 Bank of Canada announcement update

On April 16, 2025, the Bank of Canada decided to hold its benchmark overnight lending rate at 2.75%, bringing a halt to what would have been the eighth consecutive rate cut. The Bank had previously cut rates a total of 225 basis points from a high of 5% since June 2024. 

• The hold was driven by ongoing inflationary pressures and global trade uncertainty, particularly due to tariffs. Despite a softer inflation report of 2.3% in March, the reading remains above the 2% target, prompting the BoC to balance the goal of supporting economic growth with controlling inflation.
• As a result of this rate hold, the prime rate at most lenders will remain unchanged at 4.95%, meaning there will be no immediate change to borrowing costs for those with variable-rate mortgages, home equity lines of credit (HELOCs), and other variable-rate financial products.
• Fixed mortgage rates, while not directly influenced by the BoC’s overnight rate, have been impacted by bond yields, which have stabilized in the 2.6% range due to trade-related uncertainties. As a result, fixed mortgage rates have recently reduced, with the lowest five-year insured fixed mortgage rate now at 3.79% (3.74% in Quebec).
• Savers with high-interest savings accounts (HISAs) and Guaranteed Investment Certificates (GICs) will see no change to their returns, as the rate hold ensures stability in these products.
• Looking ahead, the Bank of Canada’s monetary policy will remain flexible, with future rate changes contingent on the evolving global trade environment, inflation, and other factors. 

How U.S. tariffs are shaping Canada’s mortgage rates

On April 2, 2025, the U.S. released more details about its tariff plans, including 50% reciprocal tariffs on several countries with trade surpluses. While Canada is exempt from these new tariffs, there’s still a 25% tariff on non-CUSMA imports and additional tariffs on steel, aluminum, and foreign cars and parts in force.

As concerns about a potential recession in both the U.S. and Canada have increased, investors have shifted toward safer investments, like government bonds, pushing bond yields to their lowest levels (2.488% as of April 3, 2025) since 2022. This decline in bond yields has led to a drop in fixed mortgage rates, with insured mortgage rates now as low as 3.74% and uninsured mortgage rates at 3.99%. These lower rates provide an excellent opportunity for borrowers, particularly those looking to lock in a fixed rate or renew their existing mortgage.

The Bank of Canada, which had initially been expected to cut rates in response to an economic slowdown and tariff uncertainty, may instead opt to hold rates steady. The central bank has emphasized that it will closely monitor the evolving economic situation and adjust its policies as needed.

The uncertainty surrounding the tariffs has made many potential buyers more cautious, leading to a dip in homebuyer activity. February data from the Canadian Real Estate Association (CREA) revealed a 10.4% year-over-year drop in home sales.

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

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