Best Mortgage Rates in Canada

May 2025 Mortgage Rate Update

As of late April 2025, Canadian mortgage rates have experienced a downward trend, influenced by the Bank of Canada's monetary policy and bond market movements.

• Bank of Canada Policy Rate: The Bank of Canada has maintained its key interest rate at 2.75% as of April 16, 2025, following a series of rate cuts totaling 225 basis points since mid-2024.





• Fixed Mortgage Rates: The average 5-year fixed mortgage rate offered by Canada's Big Six Banks stands at approximately 4.64% as of April 23, 2025. However, some lenders are offering rates as low as 3.79% for insured mortgages.





• Variable Mortgage Rates: The best available 5-year variable mortgage rates are around 3.95%, reflecting the influence of the central bank's rate decisions.

Predictions and Insights for the Upcoming Months

Looking ahead, experts anticipate that mortgage rates will continue to decline gradually through the remainder of 2025, contingent upon economic indicators such as inflation and employment:

• Bank of Canada Outlook: The Bank of Canada is expected to implement further 25 basis point cuts in its policy rate, potentially bringing it down to 2.25% by the end of 2025, provided inflation remains within the target range.





• Fixed vs. Variable Rates: While fixed mortgage rates are influenced by bond yields and may not mirror the central bank's rate cuts directly, they are expected to remain relatively stable or decrease slightly. Variable rates are more directly affected by the Bank of Canada's policy rate and may see more immediate reductions.

Expert Commentary from Canadian Financial Experts

Financial analysts and mortgage specialists have provided insights into the current mortgage landscape:

• Ryan Sims, Rate Expert: \"Big banks are especially keen to compete right now after a sluggish start to the year for mortgage originations,\" leading to reductions in fixed mortgage rates.





• Nesto Mortgage Forecast: Experts predict that the Bank of Canada will continue to reduce its policy rate gradually, aiming to support economic growth while keeping inflation close to the 2% target.

For homeowners and prospective buyers, staying informed about these trends is crucial for making timely and financially sound decisions.

How U.S. Tariffs Are Shaping Canadian Mortgage Rates

• The U.S. imposed a 50% reciprocal tariff and 10% base tariff, but Canada is exempt from reciprocal duties—still faces 25% on non-CUSMA imports.





• Bond yields plunged: Canada’s 5-year yield fell to 2.488% on April 3, 2025, pushing fixed mortgage offers to multi-year lows (3.74–3.99%).





• While lower rates are a boon for borrowers, uncertainty has dampened buyer confidence, with February home sales down 10.4% year-over-year.

Recent Mortgage Qualification Reforms

Effective December 15, 2024:

• 30-year amortizations now available to all first-time buyers—even without mortgage insurance—and on new construction.





• Insured mortgage cap raised from $1 million to $1.5 million.

These are the most significant home-buyer policy changes since 2012, aimed at boosting affordability.

Understanding Your Mortgage Payment

A mortgage payment typically covers:

1. Principal – Reduces your loan balance





2. Interest – Cost of borrowing





3. Mortgage Default Insurance – If down payment <20%





4. Property Taxes & Fees – If added to your mortgage

Tip for First-Time Buyers: A proposed GST exemption could save up to $50,000 on a $1 million new build. Final details depend on the April 28, 2025 federal election outcome.

Interest Rates and Their Fluctuations

Interest rates play a significant role in determining your mortgage payments. In Canada, mortgages are available with fixed or variable interest rates. Fixed rates remain consistent throughout your term, offering stability. Variable rates, however, fluctuate with changes to the Bank of Canada's policy rate, potentially impacting your monthly payments.

Amortization Period and Loan Terms

The amortization period refers to the total duration required to completely repay your mortgage. Common amortization periods in Canada range from 15 to 30 years, with 25 years being standard. A shorter amortization period means higher monthly payments but less interest over time, whereas a longer period reduces your monthly payments but increases total interest paid.

Loan terms refer to the contract duration with a lender, typically between 1 to 5 years. At the end of each term, you'll renew your mortgage under prevailing interest rates.

Down Payment Size and Its Effect on Payment

Your down payment directly influences your mortgage amount and subsequent monthly payments. In Canada, a minimum down payment of 5% is required for homes priced up to $500,000, and higher percentages apply to amounts above this threshold. A larger down payment decreases your principal, leading to lower monthly payments and reduced overall interest charges.

Additional Fees and Insurance

Beyond your mortgage, additional costs include:

• Mortgage Default Insurance (CMHC Insurance): Mandatory for down payments under 20%, this insurance protects lenders in case of borrower default. The premium is usually added to your mortgage balance, slightly increasing your payments.





• Property Taxes: Typically paid monthly or annually, these taxes vary by municipality and directly impact your total housing cost.

By carefully evaluating these factors, you can effectively manage your mortgage payments and financial obligations.

CMHC Insured Mortgages

The Canada Mortgage and Housing Corporation (CMHC) is a federal Crown corporation and Canada's primary provider of mortgage default insurance. Alongside two private insurers, Sagen and Canada Guaranty, CMHC helps stabilize the housing market by reducing the risks associated with lending, thereby allowing lenders to offer competitive interest rates even to higher-risk borrowers.

To qualify for mortgage insurance through CMHC, borrowers must meet specific criteria:

• A minimum down payment of 5% is required on homes priced up to $500,000.





• For homes priced between $500,000 and $999,999, a 5% down payment is required on the first $500,000, and 10% on the portion above $500,000.





• Properties priced $1 million or more are not eligible for insured mortgages.





• The maximum amortization period allowed for insured mortgages is 25 years.





• Borrowers must have a credit score typically of at least 600 and meet strict debt-service ratios to demonstrate affordability.

Mortgage insurance comes at a cost, charged as a premium based on the mortgage amount and the percentage of down payment. Premium rates typically range from 0.6% to 4% of the loan amount, with higher rates applicable when lower down payments are made. These premiums can either be paid upfront or, more commonly, added to the mortgage loan. This increases both the overall mortgage amount and monthly payments.

Insured mortgages offer several benefits:

• They allow homebuyers to enter the housing market with a lower initial down payment.





• Mortgage insurance facilitates lower interest rates, as the lender's risk is reduced.

However, insured mortgages also present some drawbacks:

• The added insurance premium increases the total mortgage cost and monthly payments.





• Restrictions such as a capped amortization period (25 years) can result in higher monthly repayments compared to uninsured mortgages.

Conversely, uninsured mortgages—those obtained without default insurance, generally requiring a down payment of at least 20%—offer more flexibility in amortization and may lower overall borrowing costs in the long run.

Understanding these key differences between insured and uninsured mortgages helps Canadian homebuyers make informed decisions aligned with their financial situations and long-term housing goals.

Getting Approved: What Lenders Look For

1. Credit Score: 680+ for best rates; 560+ to qualify.





2. Proof of Income: Recent pay stubs, tax returns, Notice of Assessment.





3. Mortgage Stress Test: Capacity to afford payments at higher (“qualifying”) rates.





4. Down Payment: Minimum 5% for homes under $500,000; escalates to 20% for $1.5 million+.

Strategies to Lower or Accelerate Your Payments

1. Increase Frequency: Switch from monthly to accelerated bi-weekly—one extra month of principal disappears each year.





2. Lump-Sum Privileges: Most lenders let you prepay 10–20 % annually. A $10,000 prepayment on a 5-yr fixed at 3.79 % saves roughly $7,200 in interest over the term.





3. Shorten the Amortization: Dropping from 25 yrs to 20 yrs boosts payments ~11 % but chops total interest by ~22 %.





4. Shop at Renewal: Always negotiate; 70 % of homeowners who switch lenders cut at least 30 bp off their rate.

By understanding the tools, trends and tactics, you can make confident, cost-effective decisions at every stage of your home-buying journey.

Coming Up 📅

Frequently Asked Questions

1. How do I use the mortgage rates calculator?
   Enter your home price, down payment, interest rate and amortization period. The calculator will instantly show your monthly payment, and show you the rates that are applicable to you.





2. Why does the down payment field change automatically?
   When you choose a down payment percentage (e.g. 5%, 10%, 20%), the dollar amount updates based on the home price you entered.





3. What would my monthly payment be on a $500,000 mortgage amortized over 30 years?
   At 3.79% interest, your monthly payment would be approximately $2,347. (Rates fluctuate—use today’s rate for an exact figure.)





4. What is an amortization schedule?
   It’s a timeline showing each payment’s split between interest and principal, and how your loan balance declines over time.





5. Are mortgage payments due every month?
   Most mortgages default to monthly payments, but you can often choose accelerated (bi-weekly) or weekly schedules to pay off faster.





6. Does this calculator include land transfer tax rebates?
   Yes—if you select a province with a first-time buyer rebate (like Ontario), the estimated rebate will reduce your upfront costs.





7. Are closing costs factored into the payment estimate?
   No. Closing costs (lawyer fees, title insurance, home inspection, etc.) are paid separately at closing.