Toronto | Oct 24, 2025 — Conventional Canadian mortgage rates steadied this week, leaving a narrow but meaningful spread between fixed and variable terms. With the Bank of Canada having trimmed its policy rate last month yet facing renewed inflation pressure, the national mortgage board shows lenders in a holding pattern.

As of Thursday, Oct 23, national conventional average rates stood at:

5-year fixed: ~4.69%
3-year fixed: ~4.72%
5-year variable: ~4.42%

These averages, tracked across multiple lenders, represent conventional mortgages with ~20% down, not insured high-ratio specials.

What’s Driving Mortgage Pricing

The September 25-basis-point cut by the Bank of Canada brought the overnight rate to 2.50%. It was the central bank’s first move since March and delivered modest relief to variable-rate borrowers. But the impact on fixed rates has been more muted. That’s because fixed mortgages follow bond yields, which depend more on inflation expectations than the BoC’s overnight signal.

Inflation setback: September CPI came in at 2.4% y/y, above the prior month’s 1.9%. Core measures (CPI-trim and CPI-median) remain in the 3.1–3.2% range. Lenders and bond markets read that as sticky inflation, reducing confidence in additional rate cuts.
Bond yields stable: Government of Canada 5-year yields, which anchor fixed mortgage pricing, consolidated after summer declines. Lenders are unwilling to discount aggressively while inflation remains uncertain.

Result: variables show a modest edge over fixed terms, but the spread is narrow. Borrowers are watching every inflation print to judge whether the advantage holds.

Borrower Strategies Emerging

For Canadians renewing into late-2025 or 2026, the arithmetic is tough. Even with averages in the 4.5–4.7% range, many households rolling off pandemic-era rates of 2% or less are facing double-digit percentage increases in monthly payments. The Bank of Canada itself estimates that nearly one-third of mortgage holders will see higher costs over the next 18 months.

Borrowers are adopting “payment glide path” strategies:

Extending amortization to smooth cash flow.
Making lump-sum prepayments while income allows.
Selecting shorter fixed terms (e.g., 3-year) to buy time until rate clarity emerges.

Mortgage brokers report increased interest in hybrids and variables, but also caution clients about volatility. If inflation surprises again, the BoC may pause or even reconsider its easing stance, which would hit floating-rate households hardest.

Regional Dispersion in Rates

While the averages offer a national snapshot, regional differences persist.

Ontario and B.C.: Competitive markets see sharper discretionary discounts, particularly for insured borrowers.
Prairie provinces: Smaller credit unions often price slightly higher due to funding costs.
Insured vs conventional: Insured mortgages sometimes undercut conventional averages because default insurance lowers lender risk. But the upfront insurance premium alters the effective cost.

For households comparing offers, focusing solely on the headline rate is risky. Effective APR, prepayment flexibility, penalty formulas, and porting rules all matter. A 10-bp cheaper rate may not be worth it if penalties are harsh or portability is restricted.

Housing Market Context

The housing market continues to track mortgage dynamics closely. According to CREA, national home sales fell about 1.7% month-over-month in September, though they remain up ~5% compared with a year earlier. The board noted that September still marked the strongest activity since 2021. Regional performance diverged: Montreal’s benchmark prices rose 6.4% year-over-year, while Toronto saw a 5.6% decline.

This pattern underscores why lenders are reluctant to slash rates further: demand remains uneven, with affordability stretched and household savings buffers thin. A Global News survey earlier this month found that while many households built savings during the pandemic, those reserves are now eroding just as renewals arrive.

What’s Next for Borrowers

Looking ahead, the policy tug-of-war remains the key driver.

If inflation cools decisively in October and November, fixed-rate discounts could strengthen, and variable borrowers may enjoy incremental relief.
If inflation stays sticky, lenders may hold the line, and renewal pain will remain acute.

Either way, borrowers need to stress-test budgets. Regulators continue to enforce qualifying at 2% above contract, meaning that affordability constraints persist even if headline rates stabilize.

Bottom Line

As of October 23, 2025, Canada’s mortgage landscape is in a holding pattern: fixed and variable averages are clustered in the mid-4s, with variables enjoying a slight edge. The Bank of Canada’s September cut helped sentiment but was offset by stubborn inflation.

For households facing renewals, the decision isn’t simply about chasing the lowest rate. Instead, it’s about managing cash flow risk, protecting against payment shocks, and choosing terms that align with personal tolerance for volatility.