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Ontario mortgage rate update: March 2025
On March 12, 2025, the Bank of Canada reduced its overnight rate for the seventh consecutive time. The 25-basis point cut will knock 0.25% off of lenders’ variable mortgage rates and shrink the lowest variable rates in Ontario down to around 3.9%.
That means variables are now around the same level as fixed mortgage rates. As of March 13, 2025, three-year fixed mortgage rates could be found for under 3.8% at some mortgage brokerages, while five-year fixed rates are as low as 3.89%.
Historically, those are approachable rates. But the current economic climate, particularly the unpredictable tariff war we find ourselves in, means Ontario’s home buyers may stay on the sidelines until they feel they’re on firmer financial footing. It’s hard to sign on to a mortgage if you’re not sure you’ll have a job at the end of the year.
For buyers who are confident that their income is secure, it’s actually not a bad time to be in the market. Inventory is rising, demand is soft and mortgage rates are lower than they’ve been in about two years.
Historical trends in Ontario mortgages
The average mortgage rate in Ontario
There’s no single average for mortgage rates in Ontario. Even if you had access to all the current mortgage rates being offered by lenders in Ontario, it wouldn’t be much help when you’re mortgage shopping. That’s because the mortgage offer you receive is always specific to you and takes into account multiple factors like your credit score, the type of mortgage you want and the amount you need to borrow.
Think about the “average mortgage rate” the way you would Ontario’s average home price. It’s interesting data to have, but it’s not necessarily relevant to your own home buying journey.
Ontario mortgage rate forecast: Will rates keep going down in 2025?
Variable mortgage rates
After the Bank of Canada’s fifth consecutive overnight rate cut on December 11, 2024, variable mortgage rates were down 1.75% since June. That’s a lot of action from a central bank with a conservative reputation.
The Bank likely won’t be as aggressive in 2025, as it has to wait for its most recent cuts to work their way through the economy. The overnight rate might decrease by another 50 basis points in the first half of 2025, which would bring variable mortgage rates down by another 0.5%.
Fixed mortgage rates
Because they’re determined by the government bond market, which is driven by investors’ decisions, fixed mortgage rates can be difficult to project over the long-term.
The mortgage brokers NerdWallet spoke to at the end of 2024 all expect fixed mortgage rates to remain relatively static for the next several months. That assumption, however, flies in the face of evidence from the government bond market. Bond yields, which determine fixed mortgage rates, cratered for three weeks straight starting on November 21. When yields fall consistently, it gives lenders the wiggle room to lower their fixed rates.
So, fixed rates could fall to begin the year, but lenders might keep them at current levels for a strategic reason: Lower fixed rates might entice home buyers away from the more expensive variable-rate mortgages they’ve been gobbling up to end 2024.
Ontario housing market update: March 2025
Tariffs continued having a chilling effect on home sales in Ontario in February. Sales in the province plummeted by 26.7% year-over-year, according to the Ontario Real Estate Association.
The provincial average sale price, $848,289, also declined last month, decreasing by 3.3% compared to January 2024
The average price in the Greater Toronto Area, $1,084,547, was down 2.2% year-over-year.
Ontario home sales and price forecast
In 2024, falling variable mortgage rates gave Ontario’s home buyers some relief. Buying a home in 2025 may not be so easy.
If the Bank of Canada keeps cutting in 2025, some rate relief would follow. On the other hand, home prices have remained stubbornly high, even amid high rates. Would a more active market push home prices even higher, offsetting the benefit of lower rates? Will another factor, like a pathway to increased housing supply, break the logjam?
Untangling these questions isn’t easy, but real estate pros try to factor in these and other variables as they make forecasts for the coming year.
A survey of RE/MAX agents and brokers showed expected price growth throughout Ontario, but the amount of growth depends on the area:[1]
- Low to moderate growth in Toronto (0.1%), Hamilton (2.35%) and Ottawa (2.5%).
- Moderate growth in London (4.5%), Kitchener-Waterloo (6%).
- High growth in Simcoe County (10%).
Real estate brokerage Royal LePage projects a “more balanced market compared to the frenzied conditions of 2021 and 2022” with home prices trending “modestly upward.” Phil Soper, president and CEO of Royal LePage, wrote in a press release that he expects the Bank of Canada to cut another 100 basis points from its overnight by the end of 2025, which would further push down borrowing costs for those with variable rates.[2]
In 2025, the Greater Toronto Area should see “better market conditions for buyers, including first-time homebuyers,” Shawn Zigelstein, broker and leader of Team Zold, Royal LePage Your Community Re
Ontario first-time home buyer programs
Areas including Waterloo, the County of Simcoe, Kingston and Chatham-Kent have home buyer assistance programs that can keep costs down.
Land transfer tax refund
When buying your first home in Ontario, you can claim a refund up to $4,000 of land transfer taxes.[3] If you’re a first-time home buyer in Toronto, you may qualify for a $4,475 refund on your municipal land transfer tax.[4]
Ontario land transfer taxes
Factor in the land transfer tax when buying a house in Ontario.[5] The amount you’re charged is based on your home’s value.
You’ll pay:
- 0.5% on the first $55,000 of the home’s value.
- 1.0% on additional value that’s more than $55,000 and up to $250,000.
- 1.5% on additional value that’s more than $250,000 and up to $400,000.
- 2.0% on additional value that’s more than $400,000.
- 2.5% on additional value that’s more than $2,000,000 if the land contains one or two single-family residences.
And if you’re buying in Toronto, you’ll pay a municipal land transfer tax as well.[6]
More calculators to inform your home buying decisions
Guide to Ontario mortgage rates
Types of lenders in Ontario
Mortgage lenders in Ontario tend to fall into four categories, which include:
- Large chartered banks such as Scotiabank, RBC and TD.
- Credit unions such as Northern Credit Union and Alterna Savings.
- B lenders that work with borrowers with lower credit scores, such as MCAN and Equitable Bank.
- Private lenders, who typically deal with borrowers in need of short-term funding.
Types of mortgages in Ontario
Fixed-rate mortgages
The interest rate stays the same for the duration of the mortgage term in a fixed-rate mortgage, even if the market fluctuates. Fixed rates typically:
- Are higher than variable interest rates.
- Provide a greater sense of certainty. You can count on it remaining stable for the length of the mortgage term.
Variable-rate mortgages
Variable mortgage rates increase or decrease whenever your lender’s prime rate increases or decreases. Variable-rate mortgages typically have rates that:
- Can be lower than fixed rates at the time you apply for mortgages. Variable rates can save borrowers money over the length of their mortgage — but only if rates remain the same or fall.
- Can increase throughout a mortgage term. When interest rates go up, the monthly payment on a variable-rate mortgage can become more expensive.
Hybrid-rate mortgage
One portion of your mortgage is subject to a variable rate and the other portion is at a fixed rate of interest. These mortgages:
- Can dampen the impact of fluctuating interest rates in a particularly turbulent or uncertain economy.
- Tend to be more difficult to transfer between lenders.
Insured vs. uninsured mortgages
If you make a down payment of less than 20% on a home costing under $1 million, you must insure your mortgage. Mortgage insurance adds to the cost of your loan. You pay a percentage of your mortgage amount, and the percentage depends on your down payment — the closer it is to 20%, the smaller your insurance payment is.
Homes worth $1 million or more require a down payment of at least 20%, so insurance is not required.
Short-term vs. long-term mortgages
Short-term mortgages last five years or less. Long-term mortgages last over five years. With a shorter term, you’ll need to renew your B.C. mortgage sooner, which can provide flexibility. Short-term mortgages often have lower interest rates than long-term mortgage rates.
Closed vs. open mortgages
The main difference between closed and open mortgages is that you can pay off an open mortgage whenever you like and not pay a penalty; if you make additional payments on a closed mortgage, you’ll generally be penalized.
Closed mortgages often offer better rates than open mortgages. But open rate mortgages may be a good option if you think you may be able to pay off your mortgage early.
How Ontario lenders determine mortgage rates
The mortgage rate you’re offered in Ontario will be based on two primary factors; the state of the economy and your financial situation.
Economic factors
Variable mortgage rates are influenced by the Bank of Canada’s overnight rate. When the overnight rate increases or decreases, a lender’s prime rate follows suit. Variable mortgage rates are based on a lender’s prime rate, so as the prime rate rises or falls, so do variable rates.
Fixed mortgage rates are determined by activity in the government bond market, particularly the yields on one-, three- and five-year bonds. Fixed mortgage rates follow the movement of those yields.
Your financial situation
Factors specific to you also affect the rates you’re offered. These include:
- Your credit score.
- Your income.
- Your total debts.
- The loan type you choose.
- The amount you’re borrowing.
- The term length and amortization period of your loan.
How to qualify for a lower mortgage rate in Ontario
Some factors behind rates are beyond your control, but there are steps you can take to possibly qualify for the best mortgage rates, including:
- Improve your credit score. A higher credit score generally results in better offers. Get a better score by eliminating existing debt and paying future bills in full and on time.
- Increase your income. It’s not always easy, but any additional income will improve your financial position. Lenders look at your income to assess your ability to afford a mortgage.
- Decrease your total debts. Pay down personal loans, student loans or other types of debts. Lenders consider your total debt load when determining the details of your loan.
- Consider all your options. See if adjusting the loan type, the term length or the amortization period of your loan could help.
Other factors that affect mortgage affordability in Ontario
Mortgage term
The term is the length of time your mortgage contract is valid. In Canada, mortgage terms can run anywhere from six months to as long as 10 years.
Chances are that your mortgage will have multiple terms during the amortization period until you pay it off in full.
Amortization period
A mortgage’s amortization period is the time it will take to pay off the loan in full. In Canada, the most common amortization period is 25 years. If your down payment is less than 20%, you can’t have an amortization beyond 25 years.
If your down payment is greater than 20%, you may find some lenders willing to offer amortization periods of up to 35 years.
Why would you want a shorter amortization period? You’ll pay less interest overall and potentially save thousands of dollars. A shorter amortization period, however, will result in higher monthly payments.
Frequently asked questions about Ontario mortgage rates
Mortgage rates are expected to decrease somewhat in the first half of 2025. The Bank of Canada might reduce its overnight rate another two times, which would lower variable mortgage rates by 0.5% versus today’s levels. Fixed mortgage rates will likely continue hovering between 4% and 4.5%. for much of next year.
As of March 2025, you can find fixed and variable mortgage rates for around 4% in Ontario. The rate you’re offered will ultimately depend on factors like your credit score, total debt level and income, and whether you apply for your mortgage with a Big Six bank or through a mortgage broker.
Article Sources
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RE/MAX, “2025 Canadian Housing Market Outlook,” accessed January 17, 2025.
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Royal LePage, “Rates, regulations and renewed demand: Driving revival of Canada’s real estate market despite economic and political uncertainty,” accessed January 17, 2025.
-
Government of Ontario, “Land Transfer Tax Refunds for First-Time Homebuyers,” accessed August 28, 2024.
-
City of Toronto, “Municipal Land Transfer Tax (MLTT) Rebate Opportunities,” accessed August 28, 2024.
-
Government of Ontario, “Land Transfer Tax,” accessed August 28, 2024.
-
City of Toronto, “Municipal Land Transfer Tax (MLTT),” accessed August 28, 2024.
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