Lowest 5-Year Variable Mortgage Rate in Canada Slips to 3.6%

Toronto | September 30, 2025, 11:00 IST — Canadian borrowers saw some relief this week as the lowest available 5-year variable mortgage rate dropped to 3.6%, marking one of the most competitive offers in recent months. The update, reported by industry trackers such as NerdWallet Canada, comes in the wake of the Bank of Canada’s September rate cut that lowered the policy rate to 2.50%.

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Fixed vs. Variable: Diverging Paths

While variable products are inching down, fixed mortgage rates have remained largely flat. According to data from nesto.ca, average 5-year fixed conventional mortgages are still priced at 4.68%, while 3-year fixed terms stand at 4.73%.

The divergence reflects how different funding markets drive mortgage pricing. Fixed rates follow Government of Canada bond yields, which have not declined materially in recent weeks. In contrast, variable rates are tied to the prime lending rate, which moved down after the Bank of Canada cut its overnight rate on September 17.

Mortgage analysts say the gap between the lowest variable rates and average fixed offers could influence borrower decisions. “With variable rates now in the mid-3% range at some brokerages, we’re seeing renewed interest from clients willing to accept some short-term volatility in exchange for lower initial payments,” said a Toronto-based broker.

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Central Bank Policy Shift

The Bank of Canada’s 25 basis point cut earlier in September marked a cautious easing move after months of holding rates steady. Policymakers signaled that inflation pressures had eased and economic growth was slowing, creating room for modest rate relief.

As a result, most major lenders adjusted their prime rates downward, which immediately filtered into variable mortgage pricing. However, lenders vary in how aggressively they discount, leading to a wide spread between the “lowest available” market rates and the averages reported by aggregators.

Economists expect the central bank could deliver another 25 basis point cut by year-end if economic conditions warrant. Such a move would push prime rates lower again, potentially leading to further declines in variable mortgage offers.

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Borrower Impact

For borrowers, the drop to 3.6% in 5-year variable rates could translate into meaningful savings compared to locking into fixed terms above 4.5%. On a $500,000 mortgage amortized over 25 years, the difference of nearly 1 percentage point could mean a monthly payment reduction of around $250.

Still, financial advisors caution that variable borrowers must remain prepared for rate fluctuations. “The central bank has opened the door to cuts, but global factors like the U.S. dollar strength and energy prices could limit how far and how fast they go,” explained one mortgage strategist.

Renewals remain a pain point. Many households who took advantage of sub-2% mortgages during the pandemic are now facing renewal at more than double their original rates, even with recent relief. This payment shock is expected to continue weighing on household budgets through 2026.

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Market Outlook

The path forward for mortgage rates will depend on a mix of domestic inflation, global bond market trends, and consumer demand for credit. If bond yields soften further, fixed rates may also decline modestly, narrowing the gap with variable products.

In the meantime, mortgage shoppers are encouraged to compare offers across banks, credit unions, and brokers, as spreads between lenders remain wide. Niche and non-bank lenders are often the source of the most competitive variable offers, while major banks continue to price conservatively.

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As of September 30, 2025, Canadian homebuyers and refinancers can access 5-year variable mortgage rates as low as 3.6%, a level not seen in months. The shift highlights the benefit of watching policy signals and shopping around, especially in a market where averages remain higher and affordability challenges persist.