Variable Mortgage Rates Are Easing After BoC Cut

Toronto | September 26, 2025 — Borrowers across Canada are finally seeing some breathing room on their monthly mortgage costs. Following the Bank of Canada’s September 17th decision to lower its policy rate to 2.50%, lenders have begun trimming variable mortgage rates. While major banks remain cautious, independent brokerages are already quoting five-year variable rates as low as 3.55%.

---

Variable mortgage rates in Canada are closely tied to the central bank’s overnight rate, which directly influences banks’ prime lending rate. With the latest 25-basis-point cut, prime rates at several institutions have adjusted downward, creating room for lenders to pass on savings to customers.

Brokerages have been quick to react. Industry data shows some discount variable offers already priced around 3.55%, the lowest seen in months. By contrast, the “Big Six” banks have moved more cautiously, keeping posted rates higher even as funding costs fall.

---

Impact on New Buyers
For Canadians looking to enter the housing market, the lower variable rates translate into reduced initial monthly payments compared to fixed-rate mortgages. On a $500,000 mortgage amortized over 25 years, a drop of 25 basis points could cut monthly payments by roughly $70–$80. While this may not seem dramatic, it can tip the affordability scale for first-time buyers struggling to qualify under stress-test rules.

---

Impact on Renewals
The timing is particularly relevant because many households are up for renewal in 2025–26. After years of climbing mortgage bills, borrowers locked into fixed terms at 4–5% are now exploring whether a switch to variable might save them money. Mortgage brokers report a surge in calls from clients asking whether breaking an existing contract makes sense.

The answer depends heavily on penalty fees, individual risk tolerance, and expectations for future Bank of Canada policy. Some analysts believe at least one more cut is possible by year-end, which could further lower variable rates.

---

Why Banks Are Slower to Move
Canada’s largest banks remain cautious for several reasons:

• Funding structures: They rely more heavily on bond markets and deposits, meaning fixed rates remain more important to their overall book.
• Risk appetite: Regulators have warned banks to avoid aggressive mortgage discounting given household debt levels.
• Competition dynamics: Brokerages are more nimble and willing to trim margins to capture market share.

As a result, while a few large lenders have nudged rates down, their posted variable terms still hover closer to the 4% mark.

---

What Borrowers Should Watch

1. Prime rate adjustments — check how quickly your lender passes on BoC cuts.
2. Discounts offered by brokers — competitive deals can sometimes undercut bank rates by 50–75 basis points.
3. Stress test implications — even if payments are lower, you must still qualify at the higher benchmark rate.
4. Future rate path — the BoC has signaled it wants to see inflation remain under control before cutting aggressively.

---

Market Sentiment
Industry experts remain divided. Optimists see this as the start of a broader easing cycle, which could bring further relief into 2026. Skeptics caution that global inflation risks, trade tensions, and commodity swings may force the central bank to pause sooner than expected.

---

Outlook
For now, Canadian borrowers have reason to be cautiously hopeful. While fixed rates remain stubbornly higher, the early easing in variable rates is a signal that relief is trickling into the mortgage market. If the Bank of Canada maintains its dovish tilt, more households may shift back into variable mortgages, reversing the trend of the last three years.

After years of rising costs, the first meaningful relief in variable rates could mark a turning point for thousands of Canadian homeowners — but how far the relief goes will depend on the Bank of Canada’s next moves.