If you're house-hunting or approaching a renewal in Ontario, you’ve likely noticed the odd reality: though the Bank of Canada has cut its policy rate, 5-year fixed mortgage rates haven’t fallen—and in some cases, have risen. Meanwhile, variable rates have started to decline. That leaves many homeowners wondering: why the divergence?

Understanding this gap means looking beyond central bank decisions—to what’s really moving bond yields, investor sentiment, and lender risk pricing. Here’s how today’s economic environment is reshaping mortgage options for Ontario borrowers.

Variable Rates Are Trending Down with BoC Cuts

As of early August 2025, the Bank of Canada has held its overnight rate at 2.75%, after implementing multiple cuts since mid‑2024. In turn, the prime rate has remained steady at 4.95%, and those reductions have started flowing through to variable-rate mortgages, especially those directly tied to prime.

Currently, the lowest available 5-year variable rates in Ontario are around 3.95% for high-ratio insured mortgages. On average, conventional variable rates hover closer to 4.67%, with some lenders and broker channels offering slightly better deals depending on borrower profile and down payment size.

Variable-rate borrowers are beginning to benefit from the easing cycle—either through smaller monthly payments or by having more of each payment go toward their principal balance.

Why Fixed Rates Aren’t Moving with the BoC

Unlike variable rates, fixed-rate mortgages aren’t tied to the Bank of Canada’s overnight rate. Instead, they’re based on 5-year Government of Canada bond yields—and those have been trending upward throughout 2025.

Global economic uncertainty, fiscal policy risks, and investor sentiment are driving bond yields higher. That, in turn, keeps 5-year fixed mortgage rates elevated, even as the BoC lowers its benchmark rate.

Today’s best 5-year fixed rates for insured borrowers are around 3.89%, while average conventional fixed rates remain closer to 4.67%. These figures are confirmed by national rate surveys and broker platforms. This growing gap between fixed and variable options is one of the defining trends in today’s mortgage market.

Ontario’s Current Rate Snapshot (August 2025)

Here’s a quick summary of where things stand now:

Best 5‑year fixed (insured): ~3.89%

Average 5‑year fixed (conventional): ~4.67%

Best 5‑year variable (insured): ~3.95%

Average 5‑year variable (conventional): ~4.67%

Some broker-exclusive and limited-time promotional rates may be lower for qualified borrowers, but in general, variable rates are now noticeably cheaper than their fixed counterparts.

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Confused? Use a Broker to Find the Best Rates

If you’ve been searching online for the “best mortgage rate,” you’ve likely seen a flood of conflicting numbers—3.89% here, 4.95% there, with some lenders offering special promotions that only apply in very specific cases.

This isn’t just confusing—it’s frustrating.

What many borrowers don’t realize is that mortgage rates are highly personalized, and they can vary depending on:

Whether your mortgage is insured or uninsured

Your down payment size

Your credit score and income

The property location and type

The loan-to-value ratio (LTV)

Whether you’re purchasing, refinancing, or renewing

That’s why using a licensed mortgage broker—like the team at 360Lending—can make all the difference. Instead of trying to decode a dozen different lender websites, a broker does the heavy lifting for you:

We compare rates from multiple lenders, including banks, credit unions, trust companies, and private lenders.

We explain the differences between insured, insurable, and uninsurable rates—so you understand what actually applies to you.

We find lender promotions and broker-only deals that aren’t listed online.

We help you navigate prepayment rules, rate hold periods, and penalty structures—which can cost you thousands down the road if you choose wrong.

In short, we take the guesswork out of it—so you can focus on what really matters: affordability, flexibility, and long-term peace of mind.

Why Online Rate Comparisons Can Be Misleading

Online mortgage rate listings are everywhere—but they can be very misleading for a few reasons:

1. The lowest rates are often for insured or high-ratio mortgages only

That rock-bottom rate you see online might only apply to borrowers with less than 20% down (who qualify for default insurance). If you’re refinancing or renewing an uninsured mortgage, that rate probably doesn’t apply to you.

2. Rate ads often exclude restrictions and conditions

Some of the lowest advertised rates come with strings attached, such as:

No ability to break or port the mortgage

No prepayment privileges

Large penalties for early exit

Inflexible terms around refinancing or switching lenders

Unless you read the fine print—or have a broker explain it—you may not know what you’re giving up in exchange for that low rate.

3. Lenders don’t always advertise their best rates publicly

Many banks and credit unions hold back their best offers for competitive situations—especially if they know you’re working with a broker. You might only get that extra discount once someone’s negotiating on your behalf.

4. Promos change weekly

Mortgage rates are influenced by bond yields and lender funding costs, which can change quickly. A rate that looks great today might be gone by the end of the week. That’s why it’s important to get pre-approved or lock in a rate if you’re getting close to purchase or renewal.

What’s Driving the Disconnect?

Global Inflation and Monetary Policy Divergence

While inflation in Canada has eased, global inflation—particularly in the U.S.—remains persistent. Central banks are split on timing rate cuts, and bond markets are responding by demanding higher yields to offset long-term uncertainty.

Government Borrowing Pressures

The Canadian and U.S. governments are both running significant deficits, which means they need to issue more bonds. That increased supply puts upward pressure on yields, particularly for longer-term bonds like the 5-year, which drives fixed mortgage rates higher.

Risk Aversion Among Investors

Investors are cautious about locking their capital into long-term bonds during a period of economic uncertainty. That risk aversion leads them to demand more yield—which again contributes to higher bond rates, and in turn, higher fixed mortgage pricing.

Lender Risk Management

Lenders remain cautious when pricing fixed-rate mortgages. With funding costs still elevated and prepayment risks increasing, they are not aggressively discounting fixed-rate products—especially with uncertainty around bond market movements and borrower behavior.

What to Expect for the Rest of 2025

Looking ahead, several trends are expected to shape the rate landscape:

The Bank of Canada may cut its policy rate further if inflation continues to decline, which would push variable rates even lower.

Fixed rates could come down slightly if bond yields ease, but major drops are unlikely unless there’s a sharp economic slowdown or a significant drop in global inflation.

Many borrowers coming up for renewal in late 2025 or 2026 will face significant payment increases, especially those coming off ultra-low 5-year fixed rates secured in 2020 or 2021.

Why This Matters Now

With fixed and variable mortgage rates moving in opposite directions, borrowers in Ontario face a very different mortgage market than they did just a year or two ago. For many, variable rates are no longer the riskier or more expensive choice. In fact, depending on your goals and budget flexibility, they may offer better value and more room to adapt as rates continue to shift.

If you’re renewing, buying, or refinancing, now is the time to speak with a mortgage broker. We can help you compare options from multiple lenders—not just banks—and guide you through the trade-offs between fixed and variable, including prepayment flexibility, penalties, and future rate expectations.

What to Know If You're Renewing in 2025 or 2026

If your mortgage is coming up for renewal this year, you’re not alone. A wave of 5-year fixed-rate mortgages that were signed during the ultra-low rate era of 2020–2021 are now hitting maturity.

That means:

Borrowers who locked in rates around 1.5% to 2.5% could be facing renewal offers in the 3.9% to 5.0%+ range.

According to the Bank of Canada, this could translate into payment increases of 15–25%, depending on your loan size and amortization.

For a $400,000 mortgage, that might mean a jump of $400 or more per month.

This is what’s often referred to as “renewal shock.” And it’s catching many homeowners off guard.

Here’s what you should do if your renewal is coming up:

1. Start shopping 4–6 months in advance

Most lenders will let you hold a rate for 90–120 days. That gives you a window to explore other options, compare lenders, and avoid rushing into a renewal at the last minute.

2. Don’t just sign your bank’s renewal offer

Your current lender may send you a renewal letter with one or two rate options. These are often not their best offers. Lenders count on borrower inertia—knowing that many people will sign without asking questions. Don’t leave money on the table.

3. Use a broker to compare your options

Renewals are a golden opportunity to reset your mortgage—maybe even refinance to access equity, change your amortization, or switch to a different lender with better terms. A broker can guide you through those decisions and help you lock in the best deal for your new term.

It’s Not Just About the Rate

In today’s environment, it’s tempting to just chase the lowest number—but the rate is only one piece of the puzzle.

What matters even more is how your mortgage fits with your financial goals:

Do you want payment stability for the next 5 years, or do you expect to move or refinance sooner?

Would you rather save up front with a lower rate—or have flexibility to break your mortgage without a huge penalty?

Is your income fixed or variable? Do you have a buffer if rates increase again?

This is where working with a professional becomes invaluable. At 360Lending, we help you ask the right questions, compare meaningful options, and choose a mortgage that works for real life—not just a number on a screen.

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