Overview
Variable mortgage rates in Canada are closely tied to the Bank of Canada’s overnight lending rate and the prime rates set by Canadian financial institutions. As of July 2025, variable rates are notably lower than they were in mid-2024, following several rate cuts by the Bank of Canada. The market environment remains dynamic, with rates holding steady but further declines possible depending on economic conditions.
Current Variable Mortgage Rates (July 2025)
| Lender/Source | 5-Year Variable Rate | Notes |
|---|
| Ratehub (Best Rate) | 3.95% | High-ratio, top lenders |
| Big 5 Banks (Average) | 4.5% | High-ratio, 5-year variable |
| RBC Royal Bank | 4.55% | RBC Prime 4.95% - 0.40% discount |
| TD Canada Trust | 4.79% | TD Prime 5.10% - 0.31% (as of last published update) |
| Market Range (General) | 4.0% – 4.5% | Most lenders summer 2025 |
- Prime rates among major banks are currently 4.95% (RBC).
- Variable rates are expected to remain stable in the short term, with a possibility of further decreases if the Bank of Canada cuts rates again later in 2025.
How Variable Mortgage Rates Work
- Variable-rate mortgages are tied to a lender’s prime rate, which moves in step with the Bank of Canada’s policy rate.
- Most products offer a set discount or premium to the prime rate (e.g., Prime – 0.40%).
- Monthly payments usually remain fixed, but the portion going toward interest versus principal shifts as rates change.
- If rates rise significantly, you may reach a trigger rate, where payments are insufficient to cover interest, requiring an increase in payment or adjustment to your amortization.
Recent Trends & Outlook
- From June 2024 to March 2025, the Bank of Canada cut rates seven times, lowering the overnight rate to 2.75% and prime to 4.95%.
- Rates have stabilized since March 2025; further cuts are possible if economic weakness persists.
- Forecast: The OECD expects another potential 0.50% reduction by year-end, which could lower variable mortgage rates further.
- Homebuyers now enjoy substantially better rates than in 2024, when variable rates exceeded 6%.
Major Canadian Bank Offerings
| Bank | 5-Year Variable Rate | Terms & Features |
|---|
| RBC | 4.55% (Prime 4.95% - 0.40%) | Closed term, up to $5,700 promo |
| TD | 4.79% (Prime 5.10% - 0.31%) | Closed term, flexible prepayments |
| CIBC | Variable rates available | Annual prepayments up to 20% |
Provincial Considerations
- Regulations around prepayments, portability, and penalties may vary slightly by province.
- Property transfer taxes, land transfer tax rebates, and first-time homebuyer incentives also differ regionally.
First-Time Homebuyer Incentives (Canada-wide)
- First-Time Home Buyer Incentive: Shared equity with the government to reduce monthly payments.
- Home Buyers’ Plan (HBP): Withdraw up to $35,000 from your RRSP tax-free for a down payment.
- Provincial rebates: Ontario, BC, and PEI offer land transfer tax rebates for first-time buyers.
Rate Comparison Table
| Mortgage Type | Typical Rate (July 2025) | Comments |
|---|
| 5-Year Variable | 3.95% – 4.5% | Best rates require high-ratio |
| 5-Year Fixed | 4.49% – 4.52% | Slightly higher than variable |
| 3-Year Variable | ~4% | Limited availability |
Actionable Next Steps & Recommendations
- Compare rates from multiple lenders before locking in a variable mortgage.
- Consider rate pre-approval to secure today’s rate for up to 120 days while shopping.
- Use a mortgage payment calculator to estimate your payments and the impact of rate changes.
- For a personalized mortgage solution, start your application with theratefinder—a platform that compares rates from top Canadian lenders for residential, commercial, and construction loans. The multi-step application ensures competitive offers tailored to your needs. Visit theratefinder.ca/onboarding to begin.
Summary
Variable mortgage rates in Canada have decreased significantly since mid-2024, now ranging from about 3.95% to 4.5% for 5-year terms, with further reductions possible if economic conditions warrant additional Bank of Canada rate cuts. Variable mortgages offer lower rates and potential savings but come with some risk as rates fluctuate. Always compare rates, review lender features, and take advantage of government incentives where eligible. For expert guidance and competitive rates, use theratefinder to start your mortgage application.