Canadian Mortgage Rates: Fixed vs Variable Trends

Toronto | October 6, 2025, 09:30 IST — Filed via Nesto.ca mortgage rate tracker

Canada’s mortgage market remained steady on October 6, 2025, with average fixed and variable rates showing little change despite ongoing market speculation about further Bank of Canada rate cuts later this year. According to data from mortgage broker Nesto, the 5-year fixed conventional rate held at 4.68%, while the 5-year variable slipped slightly to 4.42%.

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Current Rates at a Glance

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What This Means for Borrowers

• Fixed mortgage holders: Those locking in a 5-year fixed today would still be paying below last year’s highs, when many lenders were quoting above 5%. Stability in government bond yields has kept these rates from rising further.
• Variable mortgage holders: The 5-year variable at 4.42% reflects the Bank of Canada’s recent policy rate cut to 2.50%. That decision passed through to lenders’ prime rates, easing monthly costs for borrowers on floating terms.
• Shorter 3-year terms: Interestingly, the 3-year fixed (4.73%) is higher than the 5-year fixed (4.68%). This inversion reflects expectations that rates could continue to decline in 2026, making lenders demand a slight premium for short-term coverage.

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Why Rates Are Where They Are

Mortgage rates in Canada move on two different tracks:

1. Fixed rates are tied closely to government bond yields. With Canadian 5-year bond yields holding steady at ~3.2%, fixed mortgage offers have remained in the high-4% range.
2. Variable rates are linked to the Bank of Canada’s overnight rate. After the September 17 cut to 2.50%, lenders trimmed prime-linked products, bringing down variable offers.

This explains why variable rates are lower than fixed rates for the 5-year term, but higher for the 3-year term.

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Market Context

• Renewal pressures: According to the Bank of Canada, about 60% of households renewing mortgages in 2025–26 will see higher payments than their last term. For many 5-year fixed borrowers, that could mean a jump of 15–20% in monthly payments.
• Housing activity: In Toronto, September home sales reached an eight-month high, suggesting rate cuts are beginning to lift demand. However, average prices slipped by 0.5% month-over-month, showing that affordability remains stretched.
• Forecasts: Analysts expect the Bank of Canada may cut again to 2.25% before year-end, which could translate into further relief for variable mortgage holders. Fixed rates may soften only if bond yields retreat further.

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What to Watch Next

• The Bank of Canada’s next policy announcement in late October.
• Renewals across Canada as a wave of 2020–21 borrowers face sharply higher rates.
• Whether bond yields decline, which would provide room for fixed-rate relief.
• Lenders’ risk policies, especially as some banks tighten credit in industries hit by global trade uncertainty.

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Outlook

For now, Canadian borrowers are in a holding pattern. Fixed rates remain anchored near 4.7%, while variable terms provide some near-term savings after the central bank’s cut. The next few months will be critical: if inflation keeps cooling and growth slows, more rate cuts could arrive, tilting the balance further in favor of variable-rate mortgages.