Find the best mortgage rates in Canada

August 2025: Mortgage market update

The Canadian housing market slowed earlier in 2025 as buyers grappled with tariff concerns and economic volatility. Since then, the Bank of Canada has implemented seven rate cuts and three rate holds, bringing its benchmark rate down to 2.75%. As the market shows early signs of recovery, mortgage shoppers should stay informed about the key factors influencing rates and affordability.

• Real estate update: Canada’s housing market showed signs of renewed strength in July 2025, according to the Canadian Real Estate Association (CREA). 45,973 homes were sold during the month, marking a 6.6% increase compared to last year and a 3.8% rise from June. Since March, sales have climbed a total of 11.2%, with the Greater Toronto Area accounting for most of that growth. Despite stronger demand, prices haven’t moved significantly higher, creating favourable affordability conditions. The national average home price in July was $672,784, only 0.6% higher than last year and up 1.3% from June. The MLS Home Price Index, which provides a more accurate measure of typical home values, remained flat month-over-month and was down 3.4% annually. Inventory levels remain healthy, with a total of 88,616 new listings coming to market in July, nearly unchanged from June. With sales outpacing new supply, the national sales-to-new-listings ratio (SNLR) rose to 52%, compared to 50.1% in June and 47.7% in May. While still in balanced market territory, the steady rise suggests buyers are encountering more competition. At the end of the month, the months of inventory were at 4.4, slightly below the long-term average of five months. CREA Chair Valérie Paquin pointed out that this year’s seasonal pattern has been unusual, with sales gaining momentum through summer instead of cooling off. If the expected influx of supply in September meets strong demand, Canada’s housing market could heat up much faster than anticipated.

Read more:  Canadian home sales tick 6.6% higher in July

• CPI update: Canada’s Consumer Price Index (CPI) fell to 1.7% in July – a headline number that suggests inflation is easing. However, the main driver of this decline was cheaper energy, particularly at the gas pump. Gasoline prices dropped 16.1% year over year, following a 13.4% drop in June. The drop was also due to the removal of the federal carbon tax in April, which StatCan notes lowered the overall CPI figure; without that measure, inflation would have registered at 2.5%. At the same time, households faced mounting costs at the grocery store, as Canadians are now paying 27.1% more for groceries compared to July 2020. Housing costs also weighed on consumers. Rent growth accelerated to 5.1% annually, pushing the overall shelter index up by 3%. This marks the first increase in the shelter measure since February 2024. Homeowners saw some relief on mortgage interest costs, which declined to 4.8% from 5.6% a month earlier. While the headline drop in inflation could strengthen the case for rate cuts, the Bank of Canada (BoC) faces a difficult balancing act. Core inflation — measured by the CPI trim and median — remains elevated in the 3% range, showing that underlying price pressures persist. This complicates the BoC’s decision-making, as it must weigh the need to stimulate a slowing economy against the risk of reigniting inflation. Policymakers are likely to wait for the next CPI release on September 16 before deciding.

Read more: Canadian CPI falls to 1.7% in July

Highlights from the Bank of Canada’s July 30, 2025 announcement

On July 30, 2025, the Bank of Canada held its overnight rate steady at 2.75% for the third consecutive time, following seven rate cuts between June 2024 and March 2025 that totaled a 225-basis-point decline. Economists widely predicted this rate hold after June’s inflation report showed stronger-than-anticipated results.

• The decision to hold comes amid persistent trade tensions and unexpectedly sticky core inflation above the 2% target.
• With the overnight rate unchanged, the prime rate remains at 4.95%, meaning borrowing costs for variable-rate mortgages, home equity lines of credit (HELOCs), and other prime-linked lending products will stay the same. 
• Fixed mortgage rates, which are influenced more by bond yields than by BoC policy, remain elevated. The Government of Canada’s five-year bond yield has stayed above 3% since mid-July, driven by market unease over U.S. trade actions. As a result, the best five-year fixed insured mortgage rate in Canada has climbed to 3.89%.
• Interest rates on savings accounts, GICs, and other prime-based products will remain unchanged. GICs in particular continue to offer attractive, stable returns, especially as investors seek shelter from market volatility tied to global trade disruptions.
• While the BoC isn’t ready to lower rates now, it hasn’t ruled out future cuts. The central bank says it will continue monitoring how trade disruptions and tariffs affect inflation.

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

Canada housing market forecast for 2025

CREA has issued its latest housing market forecast, offering a slight downward revision to its previous expectations for 2025. CREA now projects that 469,503 residential properties will be sold through MLS® Systems across Canada in 2025, a 3% decline from 2024. This reflects weaker-than-expected activity in key markets such as British Columbia, Alberta, and Ontario, where ongoing uncertainty from U.S. tariffs drove more buyers to the sidelines than initially anticipated. The national average home price is also expected to decline more than previously forecast, falling by 1.7% annually to $677,368. Looking ahead to 2026, CREA anticipates a 6.3% rebound in home sales, reaching 499,081 transactions, bringing activity back in line with its spring forecast. Still, it would mark the fourth consecutive year of national sales staying below the 500,000 mark. The national average home price is expected to rise by 3% to $697,929, continuing a now six-year trend of price levels hovering around $700,000. CREA notes that the overall outlook remains highly uncertain, though conditions appear to be more stable now than during the volatile first half of 2025.

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.