Find the best 5-year variable mortgage rate

September 17, 2025, Bank of Canada announcement update

On September 17, 2025, the Bank of Canada reduced its overnight rate by 25 basis points to 2.5%, the lowest level in more than three years. This marks the end of a six-month pause in rate cuts.

• The central bank said the decision was driven by clear signs of weakening economic momentum alongside contained inflation pressures. The unemployment rate rose to 7.1% in August, and GDP contracted by 1.6% in the second quarter due to tariffs. Inflation continues to run below the 2% target, with stable core readings.
• The cut will lower the prime rate to 4.7%, providing immediate relief for borrowers with variable-rate mortgages, HELOCs, and other credit products tied to prime. For mortgage holders, the best five-year variable rate is expected to fall from 3.95% to 3.70%, creating potential savings of more than $1,000 annually on a typical loan. 
• Fixed mortgage rates are also edging lower as bond yields decline, with the best five-year fixed currently at 3.94%.
• For savers and investors, today’s cut means lower returns on deposit products such as high-interest savings accounts and GICs. However, these products still remain relatively safe options in an uncertain market environment.
• Looking ahead, the Bank signaled it remains cautious, leaving the door open to additional cuts should trade challenges, weak hiring, and slowing household spending continue. With the U.S. Federal Reserve also delivering a 25-basis-point cut in September, the BoC has policy space to continue easing without risking inflation or destabilizing the dollar.

Read more: Bank of Canada cuts target interest rate to 2.5% in September 2025 announcement

September 2025: Mortgage market update

The housing market in Canada saw a rather quiet start to 2025, as buyers stayed on the sidelines. 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 its recovery in August 2025, reaching its highest August sales level since 2021. National home sales reached 40,257, up 1.9% from a year earlier and 1.1% higher than July, marking five consecutive months of recovery since the spring downturn. Activity was strongest in Montreal, Vancouver, and Ottawa, while Toronto eased after leading much of the rebound earlier in the year. Even with stronger demand, prices have remained relatively flat, creating more favourable conditions for buyers. The national average price was $664,078, a modest 1.8% increase year over year and nearly unchanged from July. The MLS Home Price Index slipped 3.4% from last year, showing that while demand has firmed, pricing power has yet to follow suit. Sellers also re-entered the market in August, with 75,959 new listings hitting the market, up 6.1% annually. Total active listings rose nearly 9% from last year, keeping conditions balanced even as sales increased. The sales-to-new-listings ratio held at 51.2% and months of inventory sat at 4.4, both consistent with CREA’s definition of a balanced market. This balance indicates healthy competition in the marketplace, with enough new listings to meet rising demand. Looking ahead, the fall housing season could see more energy, as sidelined buyers re-enter and the potential for lower interest rates improves affordability. 

  Read more: Canadian home sales hit highest August since 2021

• CPI update: In August, Canada’s annual inflation rate rose to 1.9%, reversing July’s modest slowdown. The increase was largely due to gasoline prices, which declined less sharply than in the prior month — down 12.7% in August compared to 16.1% in July. Without gas, inflation would have risen by 2.4%, still slightly softer than the 2.5% gains seen earlier in the summer. Food prices continued to climb, recording a 3.5% annual increase versus 3.4% in July. The sharpest jump came from meat, which spiked 7.2% compared to 4.7% the previous month. However, fresh fruit provided some relief, dipping 1.1% on lower cherry and grape costs. Shelter costs showed a cooling trend, easing to 2.6% from July’s 3%. Rent growth slowed to 4.5%, and mortgage interest costs rose 4.2%, marking a significant decline from the staggering 30.9% increase recorded in August 2023. Core inflation readings also provided some reassurance, with CPI Trim dipping slightly to 3% and CPI Median holding steady at 3.1%. Given the crucial timing of the report, it supported the Bank of Canada’s 25-basis-point rate cut to 2.5% on September 17, as inflation rose less than expected and recent employment data pointed to a weakening job market. 

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