What to expect for mortgage rates in 2025 to 2030

What's Next for Rates? Dan's Take

The next Bank of Canada rate decision has landed — and Dan's watching the signs that could point to another cut, a hold, or a shift in tone. Here's what he's seeing right now.

Will the Bank of Canada cut interest rates again on December 10?

The Bank of Canada’s (BoC's) policy rate, also called the overnight rate, affects bank prime rates, which in turn move variable mortgage rates. Fixed mortgage rates follow the bond market, which can move to anticipate changes to the prime rate.

The recent Bank of Canada policy rate cut is the second one this fall. And despite a flurry of crossed-out predictions that had some estimating its rate could still fall to 2.0% or 1.75%, a third or fourth cut this year or in early 2026 is looking less likely.

Here's why interest rates may be done with falling on their swords in the near-term:

1. Inflation is a persistent concern amid tariff risks. While headline inflation declined in October, the overall index rose. If you recall what we went through (skyrocketing rates) to get inflation back to target from 8.1% (reached back in June 2022), heightened inflation risks won't be entirely ignored by the BoC, even if GDP takes on a recessionary edge.
   
2. Reduced population growth is expected to lower the unemployment rate. Fewer people competing for jobs means less slack in the labour market and less motivation to lower rates – and doing so could contribute to rising inflation.
   
3. The BoC has indicated that it can only go so far in supporting an economy dealing with trade rebalancing. Lower rates can help businesses and individuals access cheaper debt to stay afloat or even invest — that stimulus will only go so far. Establishing new trade and business relationships, reducing taxes, creating national vs provincial standards, and deregulating in some areas to increase output are other ways to support the economic downturn.
   
4. Uncertainty over U.S. trade. It's unlikely that Canadian exports will see the same outcome as the last CUSMA (Canada-U.S.-Mexico trade agreement) negotiation, and many are bracing for a different trade reality. However, lower interest rates can only go so far in supporting this type of economic upheaval.

Dire consequences were envisioned when President Trump first threatened U.S. tariffs back in January 2025. Despite some consolation that the worst hasn't yet happened, it's suspected that deeper damage may not be apparent for months.

Trade uncertainty persists, with no deal yet in sight. And once a new U.S. agreement is struck, new tariffs on now-protected CUSMA products could change the trade game Canadians have known for decades.

It's not all doom and gloom — rates are freshly lower, and many Canadians could eventually see more relief on their payments, including mortgages. These lower rates could also help encourage job creation, spending, and business growth and investment, as well as improve home affordability.

Will the BoC cut rates again on December 10?

The BoC recently commented that its rate is low enough to stay where it is — sitting at the bottom end of its neutral range. A further dip into stimulative territory would require substantial evidence of economic deterioration (aka a recession), which could hinge on how trade resolves with the U.S.

Having said that, some economists still see a BoC rate reduction to 2.0% (or lower), if not the next rate meeting, then early in 2026. However, that's not what I, or the markets, currently predict.

How are rate markets predicting the Bank of Canada's December 10 rate decision?

Courtesy of mortgagelogic.news, November 17, 2025:

• 25 bps cut: 10% market odds
• No change: 90% market odds

*60% is considered the magic number in calling the rate-decision odds

Stay tuned!

Cut, pause, or hike? How the latest economic readings predict where rates may go next.

We break down key factors — such as inflation, jobs, and GDP — and what they currently signal for future rate moves. Get the deeper dive into these factors here

• INFLATION (MOST IMPORTANT FACTOR) – PAUSE
  October's CPI (Canadian Price Index) report saw headline inflation dropping to 2.2% (from September's 2.4%), largely due to lower gas and food prices; with energy prices stripped out, inflation lowered to 2.6% (from 2.7% last month); and core inflation (average of median and trim) also eased to 2.95% (from 3.15% last month); but other underlying measures rose (next reading Dec 15)
  
• LABOUR MARKET – PAUSE
  Canada's October labour market surprised analysts (again) with 67K jobs added, driven mainly by part-time jobs in the private sector; the unemployment rate declined to 6.9% from last month's 7.1%; despite this seemingly rosier report, experts aren't reading it as a sign that our sluggish labour market is safe on third (next reading Dec 5)
  
• WAGES – PAUSE
  October's average wage growth increased again, to 3.5% from last month's 3.3%, as inflation finds its way into wages (next reading Dec 5)
  
• ECONOMIC GROWTH – CUT
  August 2025 GDP contracted by 0.3%, backtracking on most of July's 0.3%; September is tracking about 0.1% growth, the same for Q3 real GDP (0.4% annualized) — all skirting the recessionary line (Sep and Q3 reading on Nov 28)
  
• BOND YIELD MARKET – PAUSE
  The Canadian 5-year bond yield recently rose to almost 2.9%, now easing to around 2.8% following lower headline and core inflation numbers for October, though with persistent underlying pressures still the main story; expect continued volatility in a tight range in the bond market, with a downward trend only likely if the BoC is expected to cut its policy rate again

What's the most important economic factor the Bank of Canada considers? The BoC's sole mandate is to control inflation. It uses its policy interest rate (which directly influences bank prime rates) to keep inflation close to its 2.0% target, within a range of 1.0% to 3.0%.

Other key economic factors can help the BoC determine the path of inflation, whether it's likely to rise or fall.

For example, rising unemployment and slow GDP growth may call for a rate cut to stimulate the economy. However, rising inflation could suggest the need to pause or raise rates to cool demand and keep inflation in check.

What economists predict for interest rates (2025-2027)

While Dan's outlook is shaped by experience, client feedback, and lender decision points in addition to real-time trends, he also closely watches the forecasts of several economists:

• National Bank believes the Bank of Canada should lower its rate to 2.0% by the end of 2025, marking the end of the current rate-cut cycle. However, it forecasts that the policy rate is likely to remain at 2.25% until Q1 2027, rising to 2.75% by Q3.
• TD Economics expects the BoC to keep its policy rate at 2.25% until at least 2030.
• Scotiabank now forecasts the BoC will drop its rate to 2.25% by the end of 2025, then raise it to 2.75% by the end of 2026, remaining at 2.75% in 2027, while warning that tariff‑related uncertainty may delay or reset this path.
• CIBC Head Economist Benajim Tal expects the BoC policy rate to decrease to 2.0% by the end of 2025 or early 2026, and then hold at that level into 2027.
• RBC now expects the BoC rate to remain at 2.25% until the end of 2025 and for 2026.
• BMO Capital Markets has forecast the BoC rate to remain at 2.25% in 2025, dropping to 2.0% in early 2026 until 2027.
• Desjardin holds the "view that the Bank of Canada will keep interest rates on hold for the foreseeable future."
• Capital Economics predicts a BoC policy rate of 1.75% by January 2026, followed by two rate hikes in 2027, returning to 2.25%.
• Oxford Economics predicts that the BoC rate will hold at 2.25% into 2026 and not drop below 2.0% if the BoC decides to make another move.
• Recent market-based forecasts expect the BoC rate to remain at 2.25% into early 2026, and then rise to 2.50% by the end of 2026 and hold through at least 2027.

As you can see, these rate predictions reflect some future uncertainty driven by U.S.-induced market turmoil. But for now, they don't diverge widely — especially where rates are thought to go by the end of the year.

How far could rates fall? Dan's deeper take. 

Trade uncertainty is pushing rates lower — but there's not much runway left.

"The U.S. trade war has brought immediate changes for Canadian businesses, and when rules change that quickly, the response or counteractions take time, even years." – Dan Eisner, True North CEO

Today, the prime rate sits around 4.45%, based on the current BoC policy rate of 2.25%. That's about one rate cut lower than I had predicted just a couple of months ago.

U.S., China (and now India) tariffs are projected to cost Canadians and businesses billions, and signs of a broad economic slowdown are already at hand.

At the same time, multiple inflationary pressures are emerging, including a weaker-than-forecast Canadian dollar and increasing government spending and deficits.

Even with a slackening economy, rates have little room to fall further, depending on how the U.S. trade agreement is resolved.

The overnight benchmark rate (aka the BoC rate) has already declined by 2.75% since June 2024, and there is likely sufficient economic resilience (combined with government support), plus inflationary pressures (which government support will add to), to prevent rates from hitting rock bottom this time around.

Dan's rate prediction for the rest of 2025.

I expect the Bank of Canada's policy rate to remain at 2.25% for the next few months.

When tariffs entered the scene earlier this year, some rapid-fire forecasts predicted a drop to 1.5% on the policy rate and a prime rate of around 3.70%. Never say never — those calls could still play out.

However, with another 0.50% cut already in place this fall, the BoC has turned hawkish, indicating that it prefers its 'neutral' rate to work through the economy — it takes 12 to 18 months for the effects of a rate change to fully materialize.

The risk is cutting too far now and overshooting the runway, injecting stimulus that increases demand too quickly, resulting in undersupply, and putting inflation back on a path to take off again.

Another cut (to 2.0%, which would put most bank prime rates at 4.2%) becomes more likely only if trade talks stall, CUSMA gives way to broader tariffs on more goods, and Canada's economy succumbs to a recession.

As always, my forecast may change when (if?) the trade clouds part and the trajectory becomes clearer.

What is the BoC's current neutral rate range?

The Bank of Canada's published neutral rate range, which estimates a rate position that neither stimulates nor holds back the economy, is pegged at 2.25% to 3.25%.

The BoC rate is now at the low end of that range, and the central bank may decide to dip its interest-rate vehicle into stimulative territory.

If the economy is showing more weakness than expected, even a rate in the neutral range can feel restrictive, which is why the BoC frames its position as either supportive or restrictive.

Is there a danger that the prime rate could increase?

There's always the danger that bank prime rates (led by the BoC policy rate) could increase to counter inflation, although the economic softening underway due to tariffs and trade disruption makes it unlikely this year or into early 2026.

What about fixed mortgage rates?

Note that bond yields, which inform fixed rates, are affected by a mix of forces. In the short term, political and economic volatility can cause yields and fixed rates to fluctuate, as they respond to emerging data or global instability. If another interest rate cut is anticipated, expect yields and fixed rates to trend down ahead of this move, or up if a rate hike is expected.

Under current conditions, fixed mortgage rates are likely to fluctuate within a tight range between interest rate announcements, having already decreased ahead of where the prime rate sits today. Read the Fixed Rate section and see forecasts for 2025 to 2027.

Let's dive deeper into the latest economic numbers.

Why is Canada's inflation lower in October 2025?

For Canada's latest CPI (Consumer Price Index) report, headline inflation in October eased to 2.2% from Septembers 2.4%, largely due to lower gas prices, still under base year effects of the cancellation of the carbon tax in April 2025 (i.e. gas prices look lower than they are).

Stripping out the volatile energy component, the remaining CPI baskets also eased to 2.6% from 2.7% last month. And core inflation (the average of median and trimmed measures) also dropped to 3.0% from September's 3.1% in August.

However, the National Bank noted that 33 components saw price increases over the past 3 months, and other readings, such as the CPIX and CPIXFET, also rose — meaning underlying pressures are still very much present. Not surprising, considering the tariff and trade environment.

This report will underscore the Bank of Canada's estimation that inflation is remaining stable, despite the risks and economic instability, which will likely keep it to the sidelines to watch the recent rate cuts work through the economy.

Is Canada's labour market weakening in mid-2025?

With another upbeat jobs report for October 2025 — 67K jobs created, when a loss of 2.5K was expected — the market has recovered from sharp losses seen over the summer months. The unemployment rate also decreased to 6.9% from 7.1% in September.

However, experts aren't celebrating quite yet. Trade disruption is still wreaking havoc, and underlying softening remains, which is expected to reappear over the next few months. During a period of instability, numbers and markets can also be unstable, with upside surprises mixed in despite an overall downward trend.

This month saw gains in part-time employment (mainly in the private sector), taking a slice directly off full-time jobs, however. Youth unemployment fell for the first time since February. And even in Ontario, one of the hardest-hit provinces during this U.S. trade chaos, saw a gain of 55,000 jobs and an unemployment rate decline to 7.6% (a 0.3% decrease from last month).

This second consecutive, rosier labour market reading is another notch on the 'hold' side of the Bank of Canada's policy rate chalkboard. And lowered immigration targets — which could bring population growth to near zero in 2026 and 2027 — might also let some air out of the rate-cut balloon, if the unemployment rate lowers due to fewer people looking for work.

How is Canada's economic growth being affected by trade disruption in 2025?

Flashback: Q1 2025 saw an unexpected real GDP gain of 0.4%, matching the increase in Q4 2024, likely due to consumers and businesses attempting to get ahead of the U.S. trade war.

But Q2 clearly shows Canada's growth sailed into trade-related headwinds:

• Q2 2025 was a recessionary quarter, with a 0.2% contraction in real GDP
• April, May, and June logged a 0.1% decline
• The result was annualized growth running at -1.6% for Q2, a significant drop from the +2.0% pace recorded for Q1 2025

Hello, recession? Economists aren't raising the alarm, yet.

In August 2025, real GDP unexpectedly contracted by 0.3%, largely reversing the 0.3% gain for July. September is tracking at about 0.1% growth, for a (cross fingers) 0.1% real GDP boost for Q3 overall.

While certainly nothing to write home about, that minuscule growth rate would at least help Canada avoid the 'technical' recession label (two consecutive quarterly contractions).

Something to note about the August GDP report is that while the Air Canada flight attendant strike helped pull down numbers, the month would have still shown a contraction. And, consumer retail spending rose in 8 of 12 sub-sectors, although September's numbers look less favourable.

Note: The U.S. government shutdown is likely to skew Canada's Q3 GDP numbers, as import/export data reporting is expected to be incomplete.

How is economic volatility affecting Canada's housing market in 2025?

National housing sales growth and home price averages declined in September 2025.

Some buyers and sellers are coming off the sidelines, perhaps out of necessity, or simply because there are more deals available in higher-priced markets, such as those in Greater Toronto or Greater Vancouver. Others may be buying before prices rise further in lower-priced, higher-value markets, like those in Manitoba and Saskatchewan.

Two consecutive Bank of Canada policy rate cuts could spark increased fall and winter housing activity among Canadians who have been waiting (forever) for the right time to buy, despite financial concerns from the ongoing U.S. trade war. If sellers also flock to list, demand may balance out enough to keep home prices stable.

Read more here: Housing Market Forecast (2025-2027)

How is the U.S. economy influencing Canada's interest rate outlook?

Like it or not, our countries' economies are closely linked.

With a Trump presidency, here are some current concerns:

• A U.S. government shutdown can have knock-on effects, reducing trade, consumer demand, and business confidence.
• U.S. trade policies are causing supply and demand shocks, resulting in increased inflation in both countries.
• Trade disruptions and higher U.S. tariffs on certain Canadian imports are injecting significant uncertainty for Canadian companies and consumers, interrupting planning, hiring, investment, and spending decisions.
• Immigration issues between the two countries may further diminish our labour productivity.
• Interest rate divergence between the two central banks is a 2.0% spread, pressuring input prices.
• Proposed U.S. taxes (section 899 of the One Big Beautiful Bill Act) on Canadian investments and companies could have a significant impact on our economy.
• Investors are fleeing long-term U.S. Treasury bonds, pressuring yields and adding to concerns about the U.S. handling its ballooning deficit — current U.S. debt interest payments exceed the defence budget.

When will fixed rates drop?

Fixed mortgage rates are steered by the Canadian bond market and (eventually) follow the movements in bond yields up or down. 5-year bond yields are the standard for setting 5-year fixed rates and are the reference in this section and blog.

Economic weakening is having its say, but inflation risks remain.

Canada's 5-year bond yield is rollercoasting in response to recent data, including the Liberal budget, which, if passed, threatens to significantly increase the federal deficit. That raised the yield to 2.9%, and following October's lower headline inflation report, it eased to around 2.8%.

The dilemma is that until Canada reaches a trade agreement with the U.S., no one really knows the future impact on the economy and bond markets.

Factors placing downward pressure on yields, which could keep fixed mortgage rates from rising:

• The recent BoC Business Outlook Survey indicates stifled business hiring intentions and investment
• The U.S. government shutdown could further slow consumer demand and trade in Canada (there is still plenty enough being exported to be impacted)
• Declining business output in Canada due to the U.S. trade war
• Ongoing U.S. trade threats
• Cautious concern over an AI bubble developing in the stock market

Inflationary pressures remain to keep yields aloft:

• Recent rate cuts may fuel enough demand to prevent inflation from easing
• Canada Post restrictions may increase consumer prices if higher shipping costs are passed alon
• Continued and additional U.S. tariffs and supply chain disruptions
• Government debt forecast to pile up on both sides of the border
• Businesses are starting to pass along tariff and trade costs to consumers

If the economic uncertainty continues, will bond yields react in real time or remain somewhat stable, giving a big yawn until a U.S. trade agreement materializes?

Watch yields to be the tell: If they rise in response to ongoing inflationary or stimulus risks, or continue a downward trend in response to weaker data.

Will fixed rates decrease if economic weakening trumps inflation?

('Trump' pun intended.) 5-year fixed-rate specials are popping up — but yields have recently risen based on hawkish comments by central banks on both sides of the border.

If yields remain elevated for a time longer, fixed-rate specials may disappear and increase slightly across the board.

Fixed rates don't have much room to fall, and it'll likely be a tight rollercoaster for now. Yield and rates may eventually fall slightly if recessionary data results in more anticipated prime rate cuts.

If inflation risks once again become the primary market concern, fixed rates may increase again if yields rise.

Can the U.S. economy affect rate hikes here?

Yes. The U.S. economy matters for Canadian rate decisions.

Why it matters, briefly:

• Trade and prices. Strong U.S. demand and tariffs can change import and export prices here, which feeds into Canada's inflation readings.
• Policy and capital flows. If the Fed tightens while the BoC does not, capital can flow into U.S. assets, moving yields and the loonie, and that can push Canadian inflation up or down.
• Market spillovers. U.S. growth, fiscal moves, or political uncertainty can change global bond yields and risk premiums, and these moves can show up in Canadian fixed mortgage rates.

Bottom line: A hotter U.S. economy, or U.S. Fed policy rate tightening, tends to push Canadian yields and rates up, while a U.S. slowdown can make it easier for the Bank of Canada to cut its benchmark interest rate.

Will Canada see a recession?

Currently, Canada is one quarter closer to a 'technical' recession due to the ongoing U.S. trade war's impact on Canadian exports and business outlooks. Whether this downturn turns into a long, protracted period of negative growth is yet to be determined.

With a high-interest-rate environment quickly imposed on Canadians to tame surging inflation post-pandemic, a mild recession was expected through the first half of 2024, but it didn't materialize. Until Trump took office, Canada's growth projections were starting to look up for 2025.

Will market resilience bring Canada out of recessionary territory? Many experts expect a recessionary shock from the trade war. In time, it's hoped that Canadian businesses will adapt, and consumers will have enough financial resilience to weather the trade storm.

Keep in mind that a recession can hit Canadians the hardest in the sectors most affected by trade disruption – and whether the country is skirting the line between contraction and growth won't matter to them if they've lost their job.

To counteract the trade chaos, Canadian initiatives are already underway to mitigate an economic blow — including reducing inter-provincial trade barriers, reviewing restrictive government regulations that hinder productivity, and expanding international trade opportunities.

A recession would bring mortgage rates down faster.

If economic weakening accelerates, the BoC would likely drop prime rates faster (assuming that job losses and spending pull back would place downward pressure on inflation's pace), providing more budget relief when we'll likely need it most.

Is stagflation a possible economic outcome?

Stagflation, an entrenched state of high inflation coupled with a weak economy and high unemployment, is on everyone's radar. The conditions for stagflation don't currently exist because our inflation pace isn't high enough, having decreased to around 2% from over 8%, and our unemployment rate isn't yet reaching towards 8%.

Those conditions could change if inflation soars, the economy weakens, and declining interest rates don't spur enough (or fast enough) rebound spending.

Is mortgage activity picking up in 2025?

Home affordability has improved slightly in 2025 due to lower interest rates and cooling home prices in some Canadian centres.

An expected national spring rush didn't materialize. The summer months, however, saw a pickup in activity, with more buyers coming out amid increased inventory and balanced markets in many Canadian centres.

The recent Bank of Canada rate cuts appear to have sparked renewed interest — we observed a significant boost in mortgage inquiries following both the September and October 2025 rate announcements.

After months of waiting for clarity on the U.S. trade disruption and its impact on interest rates, the rate drops likely spurred some Canadians to act, chasing mortgage-rate and home-price deals amid (regionally specific) subdued local market competition.

That activity boost includes those with an upcoming renewal, eager to see how the recent prime rate cuts have improved their chances of a better rate for their next term.

With over 1M renewals arriving in 2025 alone, a recent Equifax report shows that over 28% of homeowners are making the switch to a better deal, a rise of about 46% compared to a year ago (according to a Mortgage Professionals Canada survey).

However, it is worth noting that such cuts are occurring amid an economic downturn and higher unemployment, which may temper home prices and sales growth.

Read more in our Housing Market Forecast 2025-2027

Dan's mortgage rate advice for 2025?

Use an expert broker to get your best rate and mortgage — if you really want to save more.

Whether rates are falling or rising, your best rate and mortgage can help you better afford your home. Many Canadians are still unaware that they don't have to stick to their bank for a mortgage, for a purchase, renewal or refinance.

• Shop around. You don't have to get a mortgage with your bank — and doing so may result in paying a higher rate.
• Use an expert broker, preferably a highly trained, salaried, non-commissioned True North broker. You'll get expert, unbiased advice (in your preferred language) from a broker who puts you first.
• Hold your rate. Hold or lock in your rate with us to protect your budget from rate increases while you make home-buying or mortgage decisions.

First-time home buyers, especially, need expert advice to set them on a path to successful homeownership amid all these price pressures.

Fixed rates have lowered, but a variable rate may still offer increased savings.

Fixed mortgage rates have recently lowered, but a variable rate may still have some drop room, if you can stomach the risk.

If you have time to make your decision, keep in mind that fixed rates will still be volatile within a tight range, increasing or declining in tandem with the bond yield market.

A variable-rate mortgage offers more flexibility for watching the market — and you can typically change to a fixed-rate term penalty-free if you get nervous about where rates may be headed.

Want more time to see what rates will do? Consider locking into a shorter fixed rate — like a 2- or 3-year fixed, or our low short-term fixed Rate Relief™ product.

If our unique product is right for you, it can help you bridge the gap with budget relief now, allowing you time to consider a longer commitment later.

Owning a home is a tremendous source of pride in Canada. I created True North to provide clients with a better mortgage experience and save them thousands with their best rate and mortgage choice.

Have questions about your mortgage or pre-approval? Give us a shout, anywhere you are in Canada. We have your best rate, expert advice and unbeatable service — with over 16,000 5-star reviews from our happy clients.