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 is coming up — 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 next Bank of Canada move be a cut or a hike?

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 two recent Bank of Canada policy rate cuts may be enough to drive economic recovery amid continued trade uncertainty. And the BoC has made it relatively clear that more cuts aren't necessarily going to help — unless signs of deeper damage appear to be pushing Canada into a recession.

There's talk that the policy rate is sitting too high relative to curve projections (aka where interest rates are projected to be over the long term), which is part of the reason experts see a rate hike in the long view this year, combined with more recent positive data.

For the next few months, however, the Bank isn't likely to make another rate move amid ongoing uncertainty. Especially since underlying weakness is still very much a concern, and no one can confidently predict it won't show up more strongly over the next few months.

Here's why interest rates may be on hold for a while:

1. Inflation is a persistent concern amid tariff risks. While headline and core inflation came in below expectations for November, economists say significant pressures remain. If you recall what we went through (skyrocketing rates) to get inflation back to target from 8.1% (reached back in June 2022), a substantial November unemployment rate drop and two recent rate cuts could fuel spending and demand, adding to tariff-related price pressures.
   
2. Reduced population growth is expected to keep the unemployment rate lower. Fewer people competing for jobs means less labour market slack and less motivation to change interest rates.
   
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 — but that stimulus will only go so far. Establishing new trade and business relationships, investing in infrastructure, reducing taxes, creating national vs provincial standards, and deregulating in areas to increase output are other ways to support this 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) re-negotiation, and many are bracing for a different trade reality. However, lower interest rates alone can't support 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, there's still plenty of nervousness about what may be on the horizon.

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. Many Canadians could eventually see more relief on their payments and renewal rates (now much lower than projected a year ago), as well as improved home affordability (if national home prices remain stable).

Job creation, improving consumer confidence, and increased business growth and investment could all eventually result from a BoC policy rate that now sits at the bottom of its neutral range.

Will the BoC raise its rate on January 28, 2026?

With 2025 (what a year) ending on the 2.25% rate note, another BoC rate pause is projected for the first rate date in 2026.

Courtesy of mortgagelogic.news, December 16, 2025:

• 25 bps hike: 3% market odds
• No change: 97% 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. Want an even deeper dive into the factors? Click here

• INFLATION (MOST IMPORTANT FACTOR) – PAUSE
  November's CPI (Canadian Price Index) report came in below expectations, with headline inflation unchanged at 2.2% from last month, and holding at 2.6% with energy prices stripped out; core inflation (average of median and trim) eased to 2.8% (from 3.0% last month) — all helping to relieve rate hike pressure for now (next reading Jan 19)
  
• LABOUR MARKET – PAUSE
  Canada's November labour market surpassed expectations (yet again) with 54K jobs added, driven mainly by part-time jobs (while full-time jobs were lost) and the unemployment rate declined to 6.5% from last month's 6.9% (7.0% expected); despite this rosy report, experts are still reluctant to declare that the market has turned a corner (next reading Jan 9)
  
• WAGES – PAUSE
  November's average wage growth increased again, to 3.6% from last month's 3.5%, as inflation finds its way into wages (next reading Jan 9)
  
• ECONOMIC GROWTH – PAUSE
  September 2025 GDP rose 0.2% after August's (adjusted) -0.1% drop, and Q3 2025 netted a 0.5% increase for a (impressive?) 2.6% annualized growth pace; it's not all balloons and streamers, however, when the pace is being driven by government military spending and household consumption was down by 0.4%, the worst showing since the pandemic; October is tracking at -0.3% so far (Oct reading on Dec 23)
  
• BOND YIELD MARKET – PAUSE
  The Canadian 5-year bond yield has declined to 2.9% following November's moderate inflation report, (so far) supporting the BoC view that inflation will remain within target ranges in 2026; expect continued bond market volatility in a tight range as Canada waits on U.S. trade policy developments, and amid market reactions to emerging national and global factors

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 (2025-2030)

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 expects the Bank of Canada policy rate to remain at 2.25% through Q3 2026, rise to 2.75% in Q4 2026, and remain at that level through 2027.
• TD Economics expects the BoC to keep its policy rate at an average of 2.25% through to at least 2031.
• Scotiabank now forecasts the BoC will hold at 2.25% for the first few months of 2026, then raise it to 2.75% by the end of 2026, and hold at that level until the end of 2027, while warning that tariff‑related uncertainty may delay or reset this path.
• CIBC Economics predicts the BoC policy rate will remain at 2.25% until the end of 2026.
• RBC now expects the BoC rate to remain at 2.25% until the end of 2026.
• BMO Capital Markets has forecast the BoC rate to remain at 2.25% through 2026, with a hike possible in 2027.
• Desjardins expects the BoC to be done with rate cuts in this cycle, with a potential hike in Q4 2026 to 2.5% and another hike in 2027 to 2.75% (with its rate still in the neutral range).
• Capital Economics predicts the BoC policy rate of 2.25% will hold until CUSMA is renegotiated, rather than being raised in mid-2026 as markets currently forecast.
• Oxford Economics predicts that the BoC rate will hold at 2.25% into 2026.
• Recent market-based forecasts expect the BoC rate to remain at 2.25% into early 2026, then rise to 2.50% by the end of 2026 and again to 2.75% in 2027.

Please note: The above rate forecasts are subject to change.

As you can see, expert rate predictions often mention future uncertainty driven by U.S.-induced market turmoil. Additionally, potential rate hikes, rather than cuts, have been incorporated into some long-range forecasts.

Will rates rise or fall this year? Dan's closer look. 

Trade uncertainty has pushed 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 in mid-2025.

With recent economic indicators showing moderate strength relative to U.S. trade disruptions (despite some hard-hit sectors, such as steel and aluminum), the BoC policy rate has little room to fall below current levels — though the outcome depends on how the U.S. trade agreement is resolved.

The overnight benchmark rate (aka the BoC rate) has declined by 2.75% since June 2024. There is likely sufficient economic resilience, combined with government support in the form of support packages and infrastructure spending, along with inflationary pressures (which government support will exacerbate), to prevent rates from hitting rock bottom this time around.

Dan's rate prediction for 2026.

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 forecasts could still play out.

However, with another 0.50% rate drop 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 place most bank prime rates at 4.20%) becomes more likely only if trade talks stall, CUSMA gives way to broader tariffs on more goods, and Canada's economy enters 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 the rate position that neither stimulates nor constrains economic activity, is 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 or raise it to restrict conditions that could push inflation higher.

If the economy shows greater weakness than expected, even a rate in the neutral range can feel restrictive, which is why the BoC frames its policy stance as either supportive or restrictive.

Is there a danger that the prime rate could increase?

There's always the risk that bank prime rates (led by the BoC policy rate) could rise to counter inflation, though both the economic softening from tariffs and trade disruptions and recent moderate inflation readings make it unlikely for at least the first few months of 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 a 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, plus view forecasts for 2025 to 2030

Let's dive deeper into the latest economic numbers.

Why is Canada's inflation lower in November 2025?

In Canada's latest CPI (Consumer Price Index) report, headline inflation in November was unchanged at 2.2%, primarily supported by lower rents and services and gas prices. It's noteworthy, however, that grocery prices rose by 4.7%, the most since December 2023. No one who eats is surprised by that stat.

Stripping out the volatile energy component, the remaining CPI baskets also remained at 2.6%. Core inflation (the average of median and trimmed measures) fell below 3.0% for the first time since May to 2.8%, a positive sign that inflation is being contained.

This report underscores the Bank of Canada's estimate that inflation will likely remain within target (or near target), despite risks and economic instability.

Although it expects "choppiness in headline inflation," economic drag from trade disruption should offset other price pressures, allowing the BoC to leave its rate unchanged as the recent rate cuts work through the economy. At the very least, this report eases the pressure of introducing a rate hike for now.

Is Canada's labour market weakening in late 2025?

It seems not, with the unemployment rate declining 0.6% since September, now down to 6.5% from a 7.1% high this summer.

Despite a third consecutive monthly upside surprise in Canada's November job numbers (another 54K jobs created when a loss of 2.5K was expected), experts aren't entirely convinced that a sleeping giant isn't lying in wait. Most jobs created in the past two months have been part-time, with youth employment finally seeing some relief — the 15- to 24-year-old age group gained 1.8% in employment.

Trade disruption is still wreaking havoc, and experts are nervously waiting for the impact to reappear. Many businesses remain in 'wait' mode for both hiring and investment.

So far, however, the second half of 2025 seems to hold some resilience. According to the National Bank, the 180K cumulative jobs added over the past three months is 'a sequence in the Canadian job market only seen in 2002.' Trade-impacted sectors, such as steel, aluminum, lumber and autos, which are very important to Canada's economy, are being hit hardest by layoffs, but the spread to other sectors has remained limited.

Lowered immigration targets — which could bring population growth to near zero in 2026 and 2027 — are part of the reason labour numbers are improving. The participation rate in November declined by 0.2% to 65.1%.

Uncertainty will persist until a new U.S. trade agreement is announced (or the old CUSMA is left mostly intact). But the Bank of Canada won't lower its policy rate, given that the labour market is improving month by month.

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

Flashback — A look at the GDP in previous quarters:

• Q1 2025 saw an unexpected real GDP gain of 0.4% (annualized growth of 1.6%), matching the increase in Q4 2024, likely due to consumers and businesses trying to get ahead of the U.S. trade war.
• Q2 2025 was a recessionary quarter: 0.2% contraction in real GDP and -1.6% annualized growth, a significant drop from the +2.0% pace recorded for Q1 2025.

Update December 2, 2025: Statistics Canada recently revised its GDP data for 2022 to 2024, saying that the economy expanded 1.7% more than thought for those three years.

The threat of a recession disappears for Q3 2025, but will it reappear later?

The annualized growth pace grew to an unexpected 2.6% in Q3 2025 (0.5% real GDP growth, following the 0.3% decrease in Q2) — but it amounts to a festive-looking balloon about to be popped by a sharp dose of reality.

That's because in reality, that brisk growth is primarily due to a sudden spike in government military spending coinciding with a tangible drop in imports (which are usually subtracted from exports when calculating GDP, aka gross domestic product).

And, one of the most significant measures of economic revving, household consumption, dropped by 0.4%, the worst reading since the pandemic.

October GDP is already looking more grim, projected to fall by 0.3%.

So, the economic growth party hasn't started yet — Q3 numbers are just an early, enthusiastic arrival that may have to wait for the rest of the guests (Q4 results) before a celebration can commence.

Note: The U.S. government shutdown is skewing Canada's Q3 GDP numbers, as import/export data reporting is still being compiled.

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

National housing sales growth and home price averages inched up slightly in October 2025, but was still down by over 4% year over year.

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 and 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 winter and spring 2026 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 (2025-2029)

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:

• The U.S. government shutdown is delaying numbers, or skewing the data, giving economists a tougher read on the economy
• 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.
• The interest rate divergence between the two central banks is 2.0%, 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.
• U.S. government debt is ballooning — current U.S. debt interest payments exceed the defence budget — and tariff revenue is $100B less than expected so far.

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 has eased to 2.9% following a decline in November core inflation below 3%, along with no change to the headline number of 2.2%. While both core and headline are above target, underlying pressures have eased slightly, giving bond markets some breathing room and reducing talk of interest rate hikes.

Until our nation reaches a trade agreement with the U.S., no one really knows the future impact on the economy and bond markets. For now, it's one surprise economic reading at a time, with the bond market reacting accordingly. With no Bank of Canada rate cut in the immediate future, yields are unlikely to enter a sustained downward trend unless signs of economic softening regain momentum.

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

• Despite the recent growth in the job market, an equally recent BoC Business Outlook Survey indicates stifled business hiring intentions and investment
• Some weaker U.S. economic numbers are coming in after the prolonged government shutdown
• 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 and economic uncertainty remain to keep yields aloft:

• Recent rate cuts may fuel demand and inflation
• Continued and additional U.S. tariffs and supply chain disruptions are still raising company input prices
• Government debt is forecast to pile up on both sides of the border
• Some businesses expect to pass along tariff and trade costs to consumers over the next few months
• Ongoing U.S. trade threats (a double-edged sword — potential for declining GDP and increasing inflation)

Will bond yields react in real time, or remain somewhat stable (aka a big yawn) amid ongoing uncertainty?

Will fixed rates fall soon?

Fixed rates have been held higher recently due to market and trade volatility. The economy is posting more resilience than expected as 2025 draws to a close. So far, the Bank of Canada expects inflation to remain close to its target range in 2026, which could keep fixed rates relatively stable for now.

Fixed rates may increase slightly if bond yields increase again. If yields ease, the 5-year fixed-rate may drop slightly if a trend holds.

Fixed rates don't have much room to fall, and it's likely to be a tight rollercoaster for now. Yields and rates may eventually fall slightly if recessionary data suggests anticipated prime rate cuts, or rise again if uncertainty or inflation risks are the primary market concern.

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 loosens while the BoC holds, capital may shift toward Canadian assets, pushing yields downward and weakening the loonie, which can raise import inflation.
• 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?

Canada has backed out of technical recession territory, with a stronger Q4 2025 print and recent upward revision of 2022-2024 GDP numbers. Whether this upturn turns into a sustained period of even tepid growth is yet to be determined.

With a high-interest-rate environment quickly imposed on Canadians to tame surging post-pandemic inflation, a mild recession was expected in the second half of 2025, but it hasn't materialized.

Will market resilience keep Canada out of recessionary territory? Many experts declare that Canada isn't out of the recessionary woods until more is known about how the U.S. trade agreement and CUSMA (Canada-U.S.-Mexico Agreement) will be negotiated. Whatever the fallout, it's hoped that Canadian businesses will adapt and that consumers will have sufficient 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, investing in energy and production infrastructure, reviewing restrictive government regulations that hinder productivity, and expanding international trade opportunities.

A recession would bring mortgage rates down faster.

If economic weakness accelerates, the BoC would likely drop prime rates faster (assuming that job losses and spending pullbacks would place downward pressure on inflation), 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 is well below an 8% level.

Conditions could change if inflation runs higher while the economy weakens, and lower interest rates aren't supporting 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 saw a pickup in activity, with cooling again as year-end approaches.

The recent Bank of Canada rate cuts appear to have sparked renewed interest — we observed a significant boost in mortgage inquiries since 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 2025-2029

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 with their bank for a mortgage, 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.

Prime rates may not have much more room to decline, but a variable rate may still offer savings.

A 5-year variable rate is currently lower than fixed mortgage rates. However, with prime rates likely on hold for the next few months, some homeowners may not want to stomach the risk for the savings if they think variable rates will rise again during their term.

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 (check with your lender).

Recently, we've seen many of our clients choosing a short-term fixed rate, such as a 2- or 3-year fixed, or our low 6-month fixed Rate Relief™ product, instead of the popular 5-year fixed, hoping to get past the volatility to make a clearer rate decision.

If our unique 6-month fixed-rate product is right for you, it can help you bridge the gap with budget relief now, giving you time to consider a longer commitment later.

If you're trying to time your decision, keep in mind that fixed rates will remain volatile within a tight range amid trade uncertainty, rising or falling in tandem with the bond yield market. And variable-rate discounts off prime may change. Ask your expert True North broker about holding your rate while you decide.

Owning a home is a tremendous source of pride in Canada. I created True North Mortgage 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 17,000 5-star reviews from our happy clients.