Find the best 5-year variable mortgage rates in Canada

If you’re just starting to explore Canadian mortgages, it’s normal to ask: What is a variable rate mortgage in Canada, and why does it fluctuate? A variable rate rises or falls with changes to the prime rate, which is directly influenced by the Bank of Canada’s overnight lending rate. Understanding this is especially helpful if you’re weighing fixed vs. variable, renewing your mortgage, or trying to decide whether you should lock in your variable rate mortgage. A clear grasp of how variable rates behave can make your next mortgage decision much easier.

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".
• 17.2% of all mortgage requests made to Ratehub.ca from January - November 2025 were for 5-year variable-rate mortgages.
• 25% of consumers opted for a variable-rate mortgage in 2025, up from 23% in 2024. (Source: 2025 CMHC Mortgage Consumer Survey)

2025 housing and 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.

October 29, 2025, Bank of Canada announcement update

On October 29, 2025, the Bank of Canada reduced its overnight rate by 25 basis points to 2.25%, the lowest level in more than three years. 

• The central bank said the decision was driven by signs of sluggish economic growth and stabilizing inflation pressures. The unemployment rate remained at 7.1% in September, and GDP contracted by 1.6% in the second quarter of the year due to tariffs. Inflation rose to 2.4% year-over-year in September, but the Bank believes the core measures show growth of around 2.5%, which it expects to ease within the Bank’s 2% target within the near term.
• The cut will lower the prime rate to 4.45%, 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 3.70% to 3.45%, creating potential savings of just under $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 3.79% on Ratehub.ca, a low not seen since Spring. 
• 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, further drops are unlikely as the Bank has indicated it will hold rates in future months. 

Read more: Bank of Canada cuts target interest rate to 2.25% in October 2025 announcement

How does a variable-rate mortgage work in Canada?

When you get a variable rate for a mortgage, your interest rate changes when your lender’s prime rate changes. The prime rate itself is influenced by the Bank of Canada’s overnight lending rate, which the Bank adjusts to control inflation and economic growth. When the Bank cuts its rate, your mortgage interest rate — and sometimes your payments, depending on your mortgage type — go down. When it raises rates, your costs go up.

There are two main types of variable-rate mortgages in Canada:

• Adjustable-payment variable mortgage: Both your interest rate and payment amount change whenever the prime rate moves. Your amortization (time to pay off the loan) stays consistent.
• Fixed-payment variable mortgage: Your payment stays the same even if the prime rate rises or falls. However, the amount that goes toward your principal versus interest shifts. If rates rise significantly, you could hit your trigger rate, where payments no longer cover the full interest owed — leading to negative amortization unless you increase payments or refinance. While rare, this phenomenon occurred in the latter half of 2023, when the Bank of Canada aggressively increased its benchmark rate.
  

Most variable-rate mortgages are quoted as prime plus or minus a discount (for example, prime – 1.00%). As of October 2025, with the prime rate at 4.45%, a discount of 1% would give you an effective rate of 3.45% — the best 5-year variable mortgage rate currently available on Ratehub.ca.

What drives changes in 5-year variable mortgage rates?

5-year variable mortgage rates change based on several key economic factors — most notably, the Bank of Canada’s overnight lending rate. When the Bank of Canada adjusts its policy rate, lenders typically follow by changing their prime rate within a few days. That directly affects how much borrowers pay on their variable-rate mortgages.

Here are the main factors that drive those changes:

• Bank of Canada policy rate: The BoC raises or lowers its overnight rate to control inflation and stabilize the economy. When rates go up, variable mortgage rates increase; when they fall, borrowing costs drop.
• Inflation: Rising inflation pushes the Bank to raise rates to cool spending. When inflation slows, the Bank can cut rates to stimulate growth.
• Employment and economic growth: Strong job creation and higher consumer spending often lead to higher interest rates, while slower growth or higher unemployment typically prompts rate cuts.
• Global events and market conditions: Trade disruptions, commodity prices, and international monetary policies can influence Canada’s economic outlook and, in turn, mortgage rate decisions.
• Lender competition and funding costs: Each lender sets its own discount or premium to the prime rate (for example, prime – 1.00%). These adjustments depend on competition, funding costs, and risk appetite.

Because variable rates fluctuate with these factors, they can offer savings when the economy is stable or cooling, but they also carry the risk of higher payments when inflation or growth rebounds.

Pros and cons of choosing a 5-year variable mortgage in Canada

A 5-year variable mortgage can offer meaningful savings and flexibility, but it requires comfort with uncertainty and changing payments. So if you’re wondering, “Should I lock in my variable rate mortgage in Canada?” here are some pros and cons to consider.

How 5-year variable mortgage rates and their popularity have changed over time

Looking at historical mortgage data helps put today’s rates in perspective. The table below shows the lowest 5-year variable mortgage rates in Canada over recent years, alongside other popular terms. It highlights how rates that once sat below 1% in 2020 and 2021 surged past 5% by 2023 as the Bank of Canada raised its overnight rate to curb inflation. Since then, multiple rate cuts through 2024 and 2025 have gradually brought variable rates back down to the mid-3% range.

Source: Ratehub Historical Rate Chart

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; roughly 25% of all mortgages in Canada at the end of 2022 were variable-rate mortgages, in contrast to 20% in 2019. 

But as borrowing costs spiked in 2022–2023, many borrowers shifted back to fixed terms for payment stability. As of 2025, fixed rates remain the most common, but variable products are regaining ground as rates fall. According to the 2025 CMHC Mortgage Consumer Survey, 25% of consumers opted for a variable-rate mortgage in 2025 (up from 23% in 2024). The table below, sourced from the same survey, shows the popularity of variable-rate mortgages in 2025 among the four main categories of people who contracted mortgages.

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

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