Prime rates have recently declined, and many Canadians are rethinking which term to choose.
We'll help you weigh the recent trends, risks, and potential savings to decide if a variable mortgage rate makes sense for you this year.
This rate type is top of mind again with today's mortgage clients, as the prime rate has been cut to 4.45% from its peak of 7.2% (June 2024).
Variable rates are considered to carry 'historical' savings weight, making them a favoured choice for less risk-adverse mortgage borrowers. Yet, that risk is what many choose to avoid in light of the stability offered by a fixed rate.
Amid an economic slowdown resulting from U.S. trade disruption, home buyers and owners are weighing their rate choices carefully this year:
Let's explore the potential for variable-rate mortgage savings over your next term.
Unless you've been up in the attic doing some home maintenance, you're likely aware that Canada is in the midst of a trade war with the U.S.
Read more about how U.S. President Trump's trade tariffs could alter the path of mortgage rates in 2025, and be sure to keep up with real-time forecasts in our 2025 Rate Forecast blog.
What's the current rate state? The prime rate — and, therefore, variable mortgage rates — dropped again in October 2025 by 0.25% to 4.45%, and rate forecasts are hazy as to whether more cuts are in store this year or in 2026.
Fixed rates have also recently declined. Inflationary factors stemming from trade and policy volatility may keep both rates from falling substantially further, unless a recession digs in.
Despite suffering the equivalent of 19 rate hikes (0.25% increments) from March 2022 to June 2024, the narrative has recently shifted back to the benefits this rate type offers during a period of declining rates:
Your variable rate reflects the discount off prime your lender offered for your contract rate, which stays put for your 5-year term.
The Bank of Canada is weighing U.S. trade turmoil and the resulting economic slowdown this year against inflationary pressures from tariffs, as well as increasing government debt and spending.
True North Mortgage CEO Dan Eisner predicts that the prime rate may have some room to go a bit lower in 2025 or in early 2026:
This rate forecast is subject to change, as economic conditions remain volatile. Both Canada and the U.S. are grappling with politically charged policy decisions that could impact the Bank of Canada's rate agenda in both the short and long term.
How much further variable rates could fall during your term would impact how much you'd save vs. choosing a fixed rate right now.
When you choose a variable rate, you'll notice it's expressed as a reduction off the prime rate (e.g. P -0.85%).
This rate discount off of prime is how lenders compete for your mortgage dollars — the discount can vary between lenders, and even hide other costs, like a monthly vs. semi-annual compounded rate.
Once you lock into a variable-rate mortgage, your discount doesn't change.
However, for a new purchase, renewal, or refinance, lenders may adjust their variable discount, for example, if a more challenging economic environment leads to rising operating costs.
Yes. But in fact, the normal spread relationship has only just returned, as variable rates have finally crossed the threshold amid lowering interest rates.
Variable rates are usually lower than the 5-year fixed rate by a spread of 0.25 to 1.0%. During the pandemic, this spread increased to around 1.5%. But as prime rates skyrocketed between 2022 and 2024, we were living in the (rate) upside-down, with variable rates going and staying higher than fixed rates.
A 'normally' lower variable rate (compared to a fixed rate) is one compelling reason homeowners choose this rate type to save.
Here's how much you might save choosing a variable rate of 3.60% (P- 0.85%) now vs. locking into a 5-year fixed rate of 3.89%:
Note: Assuming a $500K mortgage and 25-year amortization. The above numbers are for illustrative purposes only; please speak with a True North broker for your specific numbers. During volatile times, it may be harder to predict where interest rates might be in 5 years.
Despite the allure of the savings potential offered by a lower rate and riding out prime rate trends — a variable rate isn't for everyone.
Set it, and forget it. Some homebuyers and owners, especially first-timers, prefer the set-budget strategy (aka peace of mind) of a fixed rate.
Consider your risk preference. Prime rates (directly affected by Bank of Canada rate decisions) carry the risk of rising again if economic growth and inflation trends up, which may lead to 'rate regret' if you usually prefer the relative safety of a fixed rate.
Fixed rates aren't as high as they were last year. These rates have come down ahead of prime rate declines, making it much less expensive than a year ago to lock into a fixed rate if you're comfortable with the mortgage payment. If you prefer a fixed rate, True North offers competitive term rates, thanks to our volume discounts and access to several lenders.
In September 2025, according to True North Mortgage, the 3-year fixed rate choice outdrew the others as the favourite rate and term:
As bond yields declined, our 3-year rate offered a combination of savings and security, with a faster renewal time than both the 5-year fixed and variable rates.
How do these choices compare historically? During 'balanced' economic times, about 30% of clients typically choose a variable rate, about 60% opt for a 5-year fixed rate, and roughly 7% select a 3-year fixed rate.
Note: Stats include all lenders True North's clients were placed with, including our in-house CMHC-approved lender, THINK Financial.
Some may not want to lock into any 5-year rate if they think rates will go lower before then.
Choosing a shorter term. Some clients are happier with a shorter-term fixed rate, such as a 3-year deal, which may see them into lower rates sooner than a 5-year fixed might.
Or, for those buying a home or switching lenders, we offer the lowest fixed rate in Canada. Our low-rate 6-month Rate Relief™ product offers a quick budget break to help with closing costs or moving expenses while waiting to see if market rates drop further.
If variable rates are your thing, and you have decisions to make in the next while (like a possible move) or extra money you'd like to put down on your mortgage principal — open (vs closed) variable rates can offer all the flexibility you need.
However, open variable rates tend to be higher than typical rates because of the increased possibility of mortgage changes that the lender has to absorb.
We currently offer a No Committment™ mortgage with the lowest open variable rate in Canada. Read more about our open variable-rate product, or apply online or call us if you want to know more.
True North Mortgage consistently offers lower variable rates on average than the competition through its in-house lender, THINK Financial — and here's the proof.
This 3rd-party stat shows that over the years, we've helped clients save more with great rates and flexible mortgage terms.
Whether you choose a variable or fixed rate, or go with our in-house lender or another bank, our highly trained brokers provide unbiased advice for your best mortgage fit, in your preferred language.
You only live once (unless you have nine lives like a cat or Rick Astley), so you may as well save the most on your mortgage.
We make it easy. Our expert brokers offer you exceptional 5-star service, along with your guaranteed best rate and the right mortgage product for your needs, regardless of whether your details are straightforward or more complex.
We can help with your rate decisions in 2025 and beyond — anywhere you are in Canada.
Which rate type works best for you, variable or fixed? Some pros and cons to help you decide.
Continually updated. Where rates may go now and later — and what’s driving them.
Will trade disruptions drive mortgage rates lower, even if inflation goes higher?
