Fixed rates ticked slightly upwards but are down compared with two weeks ago. Which rate type are borrowers choosing?

The Bank of Canada brought its rate-cutting path to a shuddering halt last week, ending a run of seven straight reductions on Wednesday by leaving its benchmark rate unchanged. That means variable mortgage rates are staying put for now – but while fixed rates have ticked below their variable counterparts, there’s still no one-size-fits-all answer on which mortgage type borrowers should be choosing.
The best five-year fixed rate in Canada hovered around the 3.79% mark yesterday, according to Ratehub, compared with an optimum variable rate of 3.95%. Further movement on the variable front isn’t likely until June 4 at the earliest, when the central bank makes its next rate decision, but the bond market’s wild ride since US president Donald Trump rolled out tariffs against global trading partners also means there’s little certainty on where fixed rates are headed next.
Five-year Government of Canada bond yields, which strongly influence fixed mortgage rates, began to climb slightly in the wake of the Bank’s April decision, although they remain lower than two weeks ago.
That lack of clarity is seeing the mortgage industry urge caution and careful judgement to borrowers weighing up the best rate for purchases, renewals and refinances. As always, a key consideration is the risk tolerance of each individual borrower, according to BlueShore Financial advisor Karn Toor, and whether they can stomach the uncertainty that comes with choosing a variable rate.
For Toor, a discussion with each client normally involves a case study or two. “Let’s say it’s a renewal,” he told Canadian Mortgage Professional. “I bring it back to 2022 and I say: ‘Look, when the variable rate pointed to over 6%, how did you feel at that time?’
“Assuming that the client’s a variable-rate client and they’re like, ‘I was paranoid and I wanted to fix the rate right away,’ my answer would be, ‘You know what? Maybe you should not be in a variable term.’”
Like in investing, that question of risk tolerance – and how much peace of mind a borrower needs in their lending solution – are key factors in determining the right type of rate, particularly with the chaos of Trump’s tariff war continuing to shroud Canada’s economic outlook.
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— Canadian Mortgage Professional Magazine (@CMPmagazine) April 22, 2025
Will the Bank of Canada cut rates again this year?
The industry is also well aware that while the Bank of Canada chose to hit pause on rate cuts last week, citing lingering uncertainty about the future of that trade war and upside risks to inflation, it’s also widely expected that further reductions are on the way before the end of 2025.
Scotiabank believes the central bank is now on a “lengthy hold” and that it won’t cut again this year, but the rest of its Big Six banking rivals all believe more moves to bring rates lower are on the way.
Bank of Montreal (BMO) and National Bank say central bank decisionmakers could trim rates by as much as 75 further basis points by the end of December, a series of cuts that would have big implications in bringing variable rates down.
US trade war continues to cloud Canada’s economic outlook
Toor reiterated the difficulty of mapping out what’s likely to happen on the rate front for the remainder of the year, especially given the unpredictability of US trade policy and Trump’s seemingly ever-changing approach to tariffs.
Canada has faced a bewildering array of new tariffs followed by specific exemptions since the early weeks of Trump’s presidency, with an initial wave paused at the beginning of February and other pullbacks arriving in March and April.
“It’s really hard to say what the Bank will do, especially when there are new headlines coming out from the White House every week and the reality is that these headlines affect the market in real time,” Toor said. “I think due to that volatility it’s hard to predict what’s going to happen in the next rate cycle and decision.
“But I do think as long as inflation stays around the 2% range and assuming that we’re able to weather through these tariffs, there’s an argument to be made that the rates will continue to fall and go back to neutral. But again, that really depends on how things evolve.”
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