As of March 1, 2025, mortgage rates in Canada have experienced notable shifts, influenced by recent economic developments and monetary policy adjustments.

Bank of Canada Rate Cuts

Between June 2024 and January 2025, the Bank of Canada implemented six consecutive rate cuts, totaling a reduction of 200 basis points. The most recent cut on January 29, 2025, lowered the benchmark interest rate by 0.25%, bringing it down to 3%. This series of cuts reflects the Bank’s response to declining inflation, which stood at 1.8% in December 2024, and aims to stimulate economic growth.

Impact on Variable-Rate Mortgages

These rate cuts have directly affected variable-rate mortgages and home equity lines of credit (HELOCs), as their interest rates are tied to lenders’ prime rates. Following the January rate cut, the prime rate at most lenders decreased to 5.2%. For borrowers, this translates to reduced borrowing costs and lower payments on some variable and adjustable loans.

Fixed Mortgage Rates

Fixed mortgage rates are primarily influenced by government bond yields rather than the Bank of Canada’s benchmark rate. As of March 1, 2025, three-year fixed mortgage rates are available from 4.4% at some brokerages, while five-year fixed rates are showing from 4.19%. These rates have inched down following a decline in bond yields, providing borrowers with more favorable terms.

Rates from Major Banks

Canada’s major banks offer competitive mortgage rates. For example, the Royal Bank of Canada (RBC) provides various fixed and variable rate options, with special offers for new mortgages and those switching to RBC. Similarly, TD Canada Trust offers a range of fixed and variable mortgage rates, with a 120-day rate hold for pre-approved mortgages, allowing borrowers to secure current rates even if interest rates rise during that period.

Considerations for Borrowers

When evaluating mortgage options, borrowers should consider:

• Amortization Period: Insurable mortgages in Canada have a maximum amortization period of 25 years.  However, with a down payment of at least 20%, borrowers can access mortgages with longer amortization periods, such as 30 years. While this may result in lower monthly payments, it could come with a slightly higher interest rate and more interest paid over the life of the loan.

• Pre-Approval: Obtaining a mortgage pre-approval can lock in current rates for a specified period (e.g., 90 to 120 days), providing protection against potential rate increases while shopping for a home.

• Fixed vs. Variable Rates: Fixed rates offer stability with consistent payments over the term, while variable rates may fluctuate with market conditions, potentially leading to lower costs if rates decrease further.

In summary, the recent monetary policy easing by the Bank of Canada has led to more favorable borrowing conditions for both variable and fixed-rate mortgages. The only way to know the best available options is to connect with your mortgage broker and get organized a few months before you need your financing.  In the world of home finance it truly pays to be organized and proactive.