Back to Blog
14 Feb

Mortgage Rate Trends in Canada for 2025: Predictions, Housing Market, and What Borrowers Should Expect

All

Posted by: Avaljit Sandhu

Mortgage Rate Trends in Canada for 2025: Predictions, Housing Market, and What Borrowers Should Expect

Bank of Canada Rate Cuts & Predictions

The Bank of Canada (BoC) has started cutting rates in 2024 after reaching a 23-year high of 5.0%. By January 29, 2025, the BoC made another cut of 0.25%, bringing the policy rate down to 3.0%. This has led to most bank prime rates dropping from 5.45% to 5.20%.

Experts predict further rate cuts in 2025, but how quickly and how much depends on inflation, job growth, and potential economic disruptions, particularly from the U.S..

Impact of U.S. Tariffs on Canadian Mortgage Rates

A major concern for Canadian interest rates is the looming 25% tariffs on Canadian goods that the U.S. government has threatened to impose. If these tariffs become reality, it could cause “cost-push inflation,” which means businesses would raise prices due to higher import costs.

To counteract the economic damage from tariffs, the BoC may need to cut rates aggressively (up to 1.25%) to support economic growth.

Housing Market & Mortgage Trends in 2025

  • Canadian housing sales slowed in late 2024 but remain 19% higher than the previous year.
  • Lower mortgage rates could trigger a spring home-buying surge, though buyers may still hesitate if economic uncertainty lingers.
  • Fixed mortgage rates are expected to stabilize in the high 3% range by the end of 2025.

Overall, the market is showing mixed signals. While lower interest rates typically make homeownership more affordable, global economic factors (especially tariffs) could create new challenges.

BoC’s March 2025 Decision: Cut or Pause?

  • According to mortgagelogic.news, there is a 54% chance of another rate cut on March 12, 2025.
  • If tariffs are confirmed, rate cuts are more likely.
  • If inflation rises unexpectedly, the BoC may pause rate cuts to prevent further economic overheating.

The BoC’s primary goal is to balance inflation control while supporting economic growth. Its decision in March 2025 will be critical in setting the course for the remainder of the year.

Key Economic Indicators to Watch

  1. Inflation Rate – December 2024’s headline inflation fell to 1.8%, but core inflation rose to 3.5%.
  2. Employment Data – Canada added 76,000 new jobs in January 2025, lowering the unemployment rate to 6.6%.
  3. GDP Growth – November GDP shrank by 0.2%, but slight economic recovery is expected in early 2025.

These indicators will play a huge role in determining the direction of interest rates in 2025.

Interest Rate Forecast for 2025

  • Without tariffs: The BoC rate could drop to 2.5% by year-end.
  • With tariffs: The BoC may need to cut rates further (possibly down to 1.5%) to avoid a recession.
  • Variable mortgage rates will continue to drop as BoC cuts rates.
  • Fixed mortgage rates may stabilize with slight declines, depending on economic conditions.

Borrowers should stay updated on economic trends and prepare accordingly for their mortgage decisions.

Advice for Homebuyers & Borrowers

  • Fixed vs. Variable Rates:
    • Variable rates could offer savings if BoC continues to cut rates.
    • Fixed rates provide stability for those who prefer predictable payments.
  • Lock in rates now: A rate hold can protect against short-term fluctuations.
  • Monitor U.S. trade policies: If tariffs are implemented, BoC may cut rates faster to support the economy.

Final Takeaway

Mortgage rates in Canada are on a downward trend, but U.S. policies, inflation, and employment growth will determine how quickly and how much rates decline in 2025. Borrowers should stay informed and consider their mortgage options carefully. 🚀

Frequently Asked Questions (FAQ) About Mortgage Rate Trends in Canada for 2025

1. Will mortgage rates go down in 2025?

Yes, mortgage rates are expected to continue declining, but the pace depends on inflation, employment data, and U.S. economic policies.

2. How will U.S. tariffs impact Canadian mortgage rates?

If the U.S. imposes 25% tariffs on Canadian goods, it could create economic instability and inflation, possibly leading to aggressive BoC rate cuts.

3. Is 2025 a good year to buy a home in Canada?

It could be! Lower mortgage rates make buying more affordable, but buyers should watch market trends and possible economic disruptions before making a decision.

4. Should I choose a fixed or variable mortgage in 2025?

  • Variable mortgages could be better if rates keep falling.
  • Fixed mortgages are safer if you want predictable payments.
  • Speak with a mortgage expert to find the best option for you.

5. When is the next Bank of Canada rate decision?

The next BoC rate announcement is on March 12, 2025. This decision will set the tone for the rest of the year.

About Avaljit Sandhu – Mortgage by Aval Sandhu

I’m Avaljit Sandhu, a mortgage expert helping homebuyers, self-employed individuals, and investors secure the best mortgage rates and financing solutions in Manitoba and Winnipeg. Whether you’re looking for a self-employed mortgage, first-time home loan, or refinancing options, I can guide you through the process with expert advice and competitive rates.

📞 Contact me today for a free consultation!