
The Bank of Canada's mortgage rates can be a bit of a mystery, but we're here to break it down for you. The Bank of Canada sets the overnight lending rate, which affects the prime lending rate that banks use to set their mortgage rates.
Right now, the Bank of Canada's overnight lending rate is at 4.75%, which is the highest it's been in over a decade. This means that banks are likely to pass on the increased cost to consumers in the form of higher mortgage rates.
For example, if you're looking to take out a mortgage, you can expect to pay around 5.5% interest on a 5-year fixed-rate mortgage. This is based on the current prime lending rate of 5.45%, which is the rate that banks use to calculate their mortgage rates.
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Current Mortgage Rates
As of January 16, 2025, the best high-ratio, 5-year fixed mortgage rate in Canada is 4.04%, available across much of the country.

This rate is significantly lower than the average 5-year fixed mortgage rate available from the Big 5 Banks, which is 4.7%. However, rates from the Big 5 Banks currently range from 4.59% to 4.89%.
Here are the current mortgage rates from the Big 5 Banks, as of January 16, 2025:
What's Best Now
As of January 16, 2025, the best high-ratio, 5-year fixed mortgage rate in Canada is 4.04%, available across much of the country.
This rate is a significant drop from the average 5-year fixed mortgage rate available from the Big 5 Banks, which is 4.7% as of January 3, 2025.
Broaden your view: 5 Year Interest Only Mortgage Rates
Posted
Let's take a look at the current mortgage rates posted by various banks. BMO and CIBC are offering a 5-year variable rate of 5.95%. On the other hand, TD is offering a 5-year variable rate of 7.15%, which is significantly higher.
The lowest 5-year fixed rate is offered by RBC at 4.84%. This is a great option for those looking to lock in a low rate for a longer period.
Here's a breakdown of the posted rates from the major banks:
The lowest rates for each term are offered by RBC, including a 5-year fixed rate of 4.84%.
Factors Affecting Rates

The Bank of Canada's decisions can significantly impact mortgage rates in Canada. The Bank's benchmark interest rate affects variable mortgage rates, which rise when the benchmark rate goes up.
If you're refinancing your mortgage, you'll qualify for higher rates compared to purchasing or renewing. You can also explore a home equity line of credit (HELOC) if you have good credit and more than 20% equity in your home.
Your down payment percentage affects your mortgage rate. If you put down less than 20% of the purchase price, you'll need to purchase mortgage default insurance, which adds to your mortgage amount but results in a lower mortgage rate.
The type of property you're purchasing also plays a role. If you plan to rent out the property, your mortgage rate will be higher compared to living in it as your primary residence.
A longer amortization period can lead to a lower monthly payment, but it also means you'll pay more in interest over time.
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How Inflation Affects

Inflation can have a significant impact on mortgage rates in Canada. The Bank of Canada raises its target for the overnight lending rate to combat rising inflation, making borrowing more expensive.
This increase in the benchmark rate directly affects variable mortgage rates, which rise as a result. Banks increase their prime lending rates, and variable rates follow suit.
Fixed mortgage rates, however, are not tied to the prime rate. They're directly related to bond yields, which increase the cost to lend money.
The Bank of Canada cut its benchmark rate by 0.50% in December 2024, the fifth cut since June. This move aims to support the economy and slow down inflation.
A fresh viewpoint: Bank of Canada Lending Rate
Factors Affecting Performance
You see, the factors that affect your mortgage rate in Canada can be a bit tricky to navigate. Your mortgage rate will be higher if you plan to rent your property out vs. live in it as your primary residence.

A higher down payment can actually work in your favor, but only if it's less than 20% of the purchase price and the home value is under $1 million, then you'll need to purchase mortgage default insurance, also known as CMHC insurance.
This insurance adds to your mortgage amount, but it results in a lower mortgage rate, making your mortgage less risky for your lender. If you're renewing your mortgage, you would have needed to purchase CMHC insurance on the original mortgage to be eligible for the lowest rates.
The type of mortgage you have also plays a role, refinancing can lead to higher rates, but if you have good credit and more than 20% equity in your home, you can explore a home equity line of credit, or HELOC.
Your amortization period can also impact your mortgage rate, with insurable mortgages having a maximum period of 25 years, but if you make a down payment of at least 20%, you can access a longer period, like 30 years.
Suggestion: Rates on 20 Year Mortgage
Rate Types

Variable mortgage rates are typically lower than fixed rates but can fluctuate over time, changing alongside changes in your lender's prime rate. This can make them a more affordable option, especially for those who anticipate being able to pay off their mortgage quickly.
Variable mortgage rates remained substantially lower than fixed rates throughout 2021 and into 2022, leading to a large number of buyers opting for 5-year variable-rate mortgages. However, as variable-rate mortgages climbed to rates higher than fixed-rate mortgages over the course of ten rate hikes between March 2022 and July 2023, their popularity has diminished.
According to the 2024 CMHC Mortgage Consumer Survey, 23% of mortgages contracted during 2024 were variable-rate mortgages, down from 27% in 2023. This suggests that consumers are becoming more cautious about variable rates.
Variable rates have some key advantages, including the ability to convert to a fixed rate at any time without a penalty, as long as you stay with your original mortgage lender. You can also break a variable rate mortgage at a substantially lower cost than breaking a fixed rate mortgage.
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Here are some key benefits of variable mortgage rates:
- You can convert a variable rate to a fixed rate at any time without a penalty.
- Breaking a variable rate mortgage is substantially less expensive than breaking a fixed rate mortgage.
Historically, over 90% of Canadians who have maintained a variable mortgage rate throughout their entire mortgage term have paid less in interest than those who have stuck to a fixed rate, according to York University Professor Moshe Milevsky's landmark 2001 study.
Choosing a Rate
When you're shopping for a mortgage, one of the most important decisions you'll make is choosing a rate. Fixed rates will stay the same over the course of your mortgage term, usually 5 years.
Variable rates, on the other hand, will change alongside changes in your lender's prime rate. This means your monthly payments could go up or down depending on the market.
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How to Choose Between Fixed and Variable
Choosing between fixed and variable mortgage rates can be a bit overwhelming, but let's break it down. The main difference is whether your rate will change over the term of your mortgage.

Fixed mortgage rates stay the same over the course of your mortgage term, usually 5 years. This can provide stability and predictability in your payments.
Variable rates, on the other hand, will change alongside changes in your lender's prime rate. This means your payments could go up or down depending on the lender's rate.
If you're someone who likes to plan ahead and know exactly what you're getting into, a fixed rate might be the way to go.
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Selecting the Term
A short-term mortgage generally offers a lower rate.
You can benefit from lower interest rates when you renew a short-term mortgage, if rates stay low at your renewal.
Long-term mortgages offer stability, as you won't need to renew it often.
Long-term mortgage holders may not be able to take advantage of lower interest rates if the market fluctuates.
For your interest: Mortgage Rates Reduced
Open vs. Closed
Most Canadians opt for a closed mortgage, not only due to their lower rates but also because most home buyers do not intend to pay off their mortgages in the short term.

A closed mortgage allows you to lock in a fixed interest rate for a set period of time, providing stability and predictability in your monthly payments.
The most common type of open mortgage is the Home Equity Line of Credit (HELOC), which gives you access to a line of credit that you can draw on as needed.
Open mortgages allow you to pay off your entire mortgage balance at any time throughout the term, but you pay a premium for that option in the form of higher rates.
You might opt for an open mortgage if you're planning to move in the near future or if you're expecting a lump sum of money that would allow you to pay more of your mortgage off.
Worth a look: Mortgage Interest Rates First Time Buyer
Seven Final Questions to Lock Down Your Goal
Asking the right questions is key to finding a mortgage that suits your needs. You want to find a rate that's not just the lowest, but also the best for you.

Many mortgage pros work on commission and can dip into their own earnings to lower your interest rate. It never hurts to ask a mortgage originator if they can "buy down" your mortgage rate.
If you're working with a mortgage broker, ask them how many lenders they compared before quoting your rate. This is because lender reps only sell their own products.
Some lenders and brokers will pocket the rate difference to earn extra compensation for themselves if you don't ask if rates drop before you close.
If your rate is a cash-back effective rate, ask the broker to share their math to ensure they've given you a rebate that's big enough.
A good mortgage expert should explain why they're recommending a specific term, and be prepared to share their math and research with you.
Boosting your credit score to 720-plus, paying down revolving credit, and amassing two years of tax-documented income can make you a more appealing borrower to lenders.
Here are the seven final questions to ask your mortgage lender or broker:
- Will you buy down my rate further?
- Has anyone at your lender got a rate lower than me in the last week?
- How many lenders did you compare before quoting my rate?
- Will you tell me if rates drop before I close?
- If your rate is a cash-back effective rate, how do you calculate the cash rebate?
- Why are you recommending the term you are?
- What else can I do to get a better rate?
Qualification and Requirements

To qualify for a mortgage in Canada, you'll need to meet some basic requirements. A good credit score is essential, with a minimum score of 560 to qualify for a mortgage, and 680 or higher for the best rates.
If you have bad credit, you may need to use a sub-prime mortgage lender, who will charge higher rates. These lenders include Equitable Bank, Home Trust, and WealthBridge.
You'll also need to provide proof of income, such as pay stubs and tax documents like your Notice of Assessment (NOA). This is especially important if you've recently started a new job, as lenders may want to see that you've held the position for at least a year.
The mortgage stress test is another crucial factor in qualifying for a mortgage. This test ensures that you can afford your mortgage payments even if interest rates rise. The benchmark rate is 5.25%, or your contract rate plus 2% – whichever is higher.
For another approach, see: Mortgage Demand Falls amid Higher Interest Rates

If your lender offers you a mortgage rate of 5%, you'll need to prove you could afford to make your payments at 7% to pass the test. There are some exceptions to the stress test, including renewing your mortgage term at your original lender or switching to another lender with high-ratio, insured mortgages.
Historical and Impact
Historical mortgage rates in Canada have been all over the map over the past five years.
Looking at historical mortgage rates is a good way to understand which types of mortgage attract higher rates.
Historical Canada mortgage rates show that we've been in a relatively low rate environment.
The lowest Canada mortgage rates of the year for different types of mortgages over the past five years are available in the Ratehub Historical Rate Chart.
See what others are reading: Interest Rates Mortgage 2018
Retail Sales May Delay Cuts
Retail sales have been a crucial factor in determining the overall health of the economy, and their impact on business decisions cannot be overstated. As we've seen in the article, retail sales have been a major driver of economic growth, accounting for a significant portion of GDP.
Additional reading: U.s. Home Sales Decline despite Falling Mortgage Rates

In the face of declining retail sales, businesses may be hesitant to cut costs, as this could exacerbate the problem and lead to further economic contraction. This is evident in the article's discussion of the 2008 financial crisis, where businesses were forced to cut costs to stay afloat.
However, if retail sales continue to decline, businesses may eventually be forced to make cuts to stay afloat. As the article notes, this can lead to a vicious cycle of cost-cutting and reduced economic activity.
Businesses are taking a wait-and-see approach, hoping that retail sales will rebound and alleviate the need for cuts. This is a reasonable approach, given the importance of retail sales to the economy.
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Historical
Looking at historical mortgage rates in Canada can give us a better understanding of the current market. Historical Canada mortgage rates show us that we're currently in a relatively low rate environment.
Historical mortgage rates in Canada have varied over the past five years, with some types of mortgages attracting higher rates than others. The lowest Canada mortgage rates of the year for different types of mortgages over the past five years are available for reference.
Historical data is a good way to understand the mortgage market and make informed decisions. By looking at historical rates, we can see that we're currently in a relatively low rate environment, making it a good time to consider purchasing a home.
Explore further: Mortgage Rates Housing Market
The Impact of the Cut on Consumer Loans and Investments

The Federal Reserve's decision to cut interest rates had a significant impact on consumer loans. Rates on 30-year mortgages fell to 3.9%, the lowest level in decades.
Consumer spending increased as a result of the lower borrowing costs. This was especially true for low- and middle-income households who were able to take out larger mortgages.
The cut also made it more expensive for banks to borrow money. This led to a reduction in the number of new loans being issued.
Investors reacted to the cut by shifting their money into riskier assets. This caused the value of stocks to rise, while the value of bonds fell.
The cut had a mixed impact on the economy, but it did lead to increased consumer spending.
Worth a look: Does Canada Have Fixed Rate Mortgages
Renewal and Planning
Renewal and planning are crucial steps in managing your mortgage.
Renewing your mortgage is a process that involves reviewing and updating your mortgage agreement. This can be done through the mortgage renewal process, which typically occurs every few years.

To ensure a smooth renewal, it's essential to understand the mortgage renewal tips. These tips can help you navigate the process and make informed decisions about your mortgage.
One key aspect to consider is early mortgage renewal. Renewing your mortgage early can provide you with more time to shop around for better rates and terms. However, it's not always possible, and you may face a mortgage renewal denied if your lender declines your request.
If you're not satisfied with your current lender, you may want to consider switching providers. This can be a good option if you're looking for better rates or more flexible terms.
Frequently Asked Questions
What is the Bank of Canada's interest rate now?
The Bank of Canada's current interest rate is 3.25%. Check our latest updates for the most current information.
Sources
- https://www.ratehub.ca/best-mortgage-rates
- https://financialpost.com/real-estate/best-mortgage-rates-canada
- https://www.ratespy.com/best-bank-mortgage-rates
- https://www.canadianmortgagetrends.com/2024/11/fixed-mortgage-rates-may-not-follow-bank-of-canada-cuts-former-td-economist-warns/
- https://toronto.citynews.ca/2024/06/05/interest-rate-cut-explainer-bank-of-canada/
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