Best Variable Rate Mortgages in Toronto

With a variable rate mortgage, your interest rate is typically tied to the lender’s prime rate, which can fluctuate based on the Bank of Canada’s benchmark rate. Some borrowers prefer this “upside potential” of lower rates, especially if they believe rates will stay low or drop further.

Our Lowest Variable Rate Mortgages

Should I get a Variable Rate?

Though variable rate mortgages are subject to rate fluctuations, if a borrower believes that rates are likely to drop over the next few years, they may be willing to take the risk of a variable mortgage. The hope is that the mortgage rate will drop gradually, either reducing their payment or the amortization period of their mortgage. Alternatively, if a borrower prefers the predictable risk of a fixed rate mortgage, they may miss an opportunity to have a lower interest rate if rates continue to drop. Recently interest rates and the prime rate have been on the decline. As the Canadian economy recovers from the most recent recession, the Bank of Canada is reducing rates in order to encourage spending and ensure that the economy doesn’t slow too much. It’s important to evaluate your needs to determine the best mortgage rate for you.

Unrate mortgage agents are recommending more variable-rate mortgage renewals coming up in 2025 than we have in the past. Economists and market forecasts may indicate that the Bank of Canada is nearing the peak of its rate-hiking cycle or may even start lowering rates in the near future. Variable-rate mortgages could benefit from such rate reductions, leading to lower monthly payments over time.

Is It a Good Idea to Get a Variable Rate Mortgage in 2025?

Based on current economic and market data, we are often considering a variable rate mortgages as a cost-saving option for 2025-2026. Borrowers may also have the opportunity to switch to a fixed rate during a market dip, potentially locking in favorable terms.

However, variable rate mortgages come with inherent risks. We typically suggest them for borrowers who understand these risks and have mortgage payments that are relatively small compared to their income. For first-time homebuyers, who often face higher payments relative to their income and limited equity, a variable rate may not be the most suitable option.

Currently, variable rates are priced only about 0.25% higher than fixed rates. With projected interest rate cuts of 0.50% or more in 2025, variable rates are likely to drop below fixed rates, further enhancing their appeal for certain borrowers.

How Low Will They Go?

Mortgage rates in 2025 and 2026 are unlikely to return to the historically low 2% levels seen during the COVID-19 pandemic. Instead, they are expected to stabilize within the higher range of 3% to 4%, depending on the type of rate.

Fixed mortgage rates, which are primarily influenced by bond yields, may remain around 4% due to the ongoing impact of elevated U.S. treasury yields. On the other hand, variable rates, which are tied directly to the Bank of Canada’s policy rate, could see a reduction. With anticipated cuts of 0.50% to 0.75%, the central bank’s rate is expected to settle between 2.5% and 2.75%, resulting in an average variable mortgage rate of approximately 3.95% or slightly lower.

Source: Bank of Canada