For many Ontarians, monitoring mortgage rates is crucial when planning a home purchase, refinancing, or renewing a loan. After a period of rising borrowing costs in recent years, the big question now is: Are mortgage rates in Ontario going down?

Current State of Mortgage Rates in Ontario

As of late August 2025, mortgage rates in Ontario have stabilized but remain relatively elevated compared to pre-2022 levels. The best high-ratio, 5-year fixed mortgage rate sits around 4.04%, while the best 5-year variable mortgage rate is about 3.95%. These rates reflect ongoing influences from government bond yields, Bank of Canada policy, and market uncertainty.

The Bank of Canada (BoC) paused its overnight interest rate at 2.75% after seven cuts totaling 225 basis points between mid-2024 and early 2025. However, the prime rate, which directly affects variable mortgage rates and other prime-based lending, remains at 4.95% for now, meaning variable-rate mortgage holders have not yet seen further rate relief.

Why Have Rates Stabilized but Not Dropped Significantly?

Mortgage rates are influenced by a mix of factors, including:

• Bank of Canada policy: The BoC’s target rates guide prime lending rates. While cuts have been made, the central bank is cautious due to persistent inflation and global trade uncertainties.
• Government bond yields: Fixed mortgage rates are more sensitive to bond market dynamics. Currently, 5-year bond yields hover above 3%, partially due to tariff tensions and economic uncertainty, keeping fixed rates elevated.
• Economic factors: Inflation, employment data, and external trade issues all shape future rate decisions.

What Does the Mortgage Rate Forecast Look Like?

Experts anticipate the Bank of Canada may hold rates steady through the fall of 2025 but are open to further modest cuts later this year, possibly bringing the overnight rate down to around 2.25% by December. This could translate into a gradual easing of borrowing costs in early 2026, but with a cautious approach due to economic conditions.

Fixed mortgage rates may not fall significantly in the short term because bond yields are less responsive to central bank moves and more driven by market forces. Variable rates might see modest relief if the prime rate decreases following BoC rate cuts.

What Should Ontario Borrowers Do Now?

• Lock in rates if you see favorable terms: In a volatile environment, getting a mortgage pre-approval with a rate hold can protect you from sudden increases.
  
• Shop around: Many lenders, including big banks, credit unions, and brokers, offer different rates and incentives. For fixed-rate borrowers, slight differences can save thousands over time.
  
• Consider your risk tolerance: Variable mortgages may benefit from potential rate cuts but carry the risk of rate hikes if inflation surprises markets.
  
• Stay informed: Watch for the Bank of Canada’s upcoming announcements (next scheduled in September 2025) and adjust your mortgage strategy accordingly.

Final Thoughts

Mortgage rates in Ontario have come down somewhat from their peak but remain elevated due to economic and geopolitical complexities. While further rate drops are possible later in 2025, the pace will likely be gradual and cautious.

Borrowers should focus on securing favorable terms now, working with mortgage professionals, and staying updated on market trends to optimize their borrowing costs.

At Cannect, we aim to empower Ontarians with clear, timely information to make smart mortgage decisions in these changing times.