Interest rates on fixed-rate mortgages won’t go down any time soon as volatile geopolitical tensions cast uncertainty on global markets, pushing more mortgage shoppers to opt into variable rates, brokers say.
The Bank of Canada announced Wednesday it is keeping its key interest rate at 2.25 per cent as economists forecast the rate will likely remain unchanged for most of the year.
“Borrowing rates have moved back toward a more neutral setting, neither stimulating nor acting as a drag on economic activity,” said Phil Soper, president and CEO of Royal LePage. “That’s a return to more normal conditions. Rates can still move modestly in either direction depending on how the economy evolves, but the most likely scenario is a period of stability.”
For homebuyers and those approaching a mortgage renewal, “stability matters,” he said, as it provides households more certainty around financing.
While fixed-rate accounts for the vast majority of mortgages, variable-rate mortgages are surging among consumers as the Bank of Canada’s rate holds.
Variable-rate mortgages are tied to rate changes by the Bank of Canada, meaning variable-rate mortgages move in lock-step with increases or decreases to the central bank’s key rate. Meanwhile, most fixed-rate mortgages are tied to the five-year bond yield; when the bond yield goes up so does the interest on fixed-rate mortgages.
For borrowers deciding between fixed and variable rates, it’s important to note that five-year bond yields have been volatile in recent weeks, said Leah Zlatkin, licensed mortgage broker and LowestRates.ca expert.
“That movement has led to increases in some fixed mortgage rates as lenders adjust pricing in response.”
It’s unlikely that fixed mortgage rates will lower in the near future, as “rising geopolitical tensions and erratic U.S. trade policy have kept global bond yields firmly elevated,” said Penelope Graham, mortgage expert at Ratehub.ca.
The best insured five-year fixed mortgage rate in Canada is 3.84 per cent, which isn’t too different than variable-rates — if consumers want the peace of mind that fixed-rates offer, it’s not much of a compromise locking in to fixed instead of variable, she added.
Consumers can grab a variable rate as low of 3.35 per cent — the best offering since the summer of 2022, Graham said.
“You’re going to be paying more monthly for your mortgage but it’s better than it was a couple of years ago,” she said, adding that variable-rate mortgages were sitting around 5 per cent just 18 months ago.
Since June 2024, the central bank has had nine cumulative rate drops taking its key interest rate from 5 per cent to 2.25 per cent.
And variable rates make up a growing share of mortgages.
In 2025, fixed-rates accounted for 88.6 per cent of mortgages in 2025 with variable rates accounting for 11.4 per cent, Graham said. An increase from just seven per cent in 2024.
In January, variable-rates were 26 per cent of mortgages, up from 19 per cent in December.
“We’ve seen quite a strong surge,” Graham said. “Fixed mortgage rates still make up more than 70 per cent of all inquiries and I don’t think that will change too much. But we always see demand for variable rise when we’re in this kind of interest rate environment.”
