Fixed-rate terms make up 62 per cent of mortgages so far in 2025, versus 25 per cent in variable and 9 per cent a combination of the two, CMHC data show.Paige Taylor White/The Canadian Press
When the Bank of Canada lowered its benchmark interest rate on Sept. 17, it ended six months of rate stagnation and ushered in a new era of lower borrowing costs for Canadians.
Now, a week and a half out from that quarter-percentage-point rate cut, we’re seeing shifts in consumer demand. Borrowers are increasingly interested in variable mortgages, wondering if the time is right to risk taking on a floating, market-linked interest rate.
Historically, most Canadian borrowers have gravitated towards fixed mortgages, for both the payment predictability and peace of mind. Unlike variable rates, which fluctuate alongside the BoC’s benchmark lending rate, payments on a fixed mortgage don’t change over the course of the mortgage term.
According to data from the Canada Mortgage and Housing Corp., fixed-rate terms make up 62 per cent of mortgages in force so far in 2025, versus 25 per cent in variable and 9 per cent a combination of the two. (Survey results do not total 100 per cent.)
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But when the BoC is in a cutting mood, the desire for predictability tends to go out the window and there’s a surge of mortgage applicants for variable rates. Their market share grows as the benchmark lending rate trends lower.
At Ratehub, we’re seeing this in our own internal data; so far in September, variable-rate mortgages have made up 14 per cent of all deals, and two-thirds of clients are asking about them on the phone.
This is the highest proportion of variable deals we’ve seen since December, 2024, when the central bank last cut rates by a half-percentage point.
For some perspective, this proportion lingered in the 4- to 5-per-cent range in the first half of 2024, amid the tail-end of the BoC’s lengthy rate hold, which lasted from March to June of 2023. In contrast, during the pandemic-induced low-rate era of 2021-22 – when the BoC’s rate was 0.25 per cent – variable-rate mortgages made up over 40 per cent of all deals.
It’s easy to understand why more borrowers are turning to variable mortgages. Right now, five-year variable terms are the cheapest in Canada, with the lowest at 3.7 per cent. Keep in mind there’s possibly more rate cuts to come this fall.
Fixed-rate mortgages, meanwhile, are priced at least 10 basis points higher, and appear to be stagnating. (There are 100 basis points in a percentage point.) Bond yields, which lenders use as a pricing floor to determine fixed rates, have been largely unchanged following the BoC’s last rate announcement.
For a borrower looking to score the lowest rate, and who can stomach the risk that those rates may eventually rise, getting a variable mortgage seems like a no-brainer. And if you are considering one, don’t delay – taking out a rate hold now will secure the current spread to the prime rate offered by the lender.
This spread - the difference between the central bank’s prime rate and the rate that lenders offer – is how variable mortgage rates are priced, and is why they move in tandem with the BoC’s benchmark lending rate, as it directly influences prime rates.
What borrowers may not realize is that lenders don’t always pass down – or preserve – the full discount suggested by a BoC rate cut, and may reduce the spread to prime among their variable-rate borrowing products.
For the time being, this full spread has remained intact at most lenders – but this could change in the coming months, especially if more rate cuts are in store from the central bank.
The takeaway for borrowers? If you think a variable-mortgage rate is for you, take action sooner rather than later to secure the largest discount possible.
Penelope Graham is the head of content at Ratehub.ca
