Toronto, Canada – Mortgage rates in Canada have dipped to their lowest levels in 2025, driven by a second consecutive month of weak employment data that has heightened expectations of further Bank of Canada (BoC) rate cuts. The latest Labour Force Survey from Statistics Canada, released September 5, 2025, reported a loss of 65,500 jobs in August, pushing the unemployment rate to 7.1%, the highest since May 2016 outside the pandemic years. This dismal jobs report, coupled with similar softness in U.S. labor data, has fueled a rally in bond markets, bringing mortgage rates down to levels not seen since late 2024.
As of September 5, 2025, the lowest advertised five-year fixed insured mortgage rate stands at 3.84%, with three-year fixed rates at 3.64% and five-year variable rates at 3.9%, according to data from cadtod.com. These rates reflect a significant decline from their 2023-2024 peaks, when five-year fixed rates hovered around 5.5% to 6.5%. The drop follows a 175-basis-point reduction in the BoC’s policy rate since June 2024, bringing it to 2.75%, with most bank prime rates at 4.95%.
The August jobs report, which showed a sharp decline in part-time positions (-60,000) and losses in sectors like manufacturing (-19,200) and professional services (-26,100), has reinforced market expectations of a BoC rate cut at its September 17, 2025, meeting. Economists from TD and CIBC now estimate an 85% chance of a 25-basis-point cut, with some projecting rates could fall to 2.25% by year-end. “The labor market’s weakness is a clear signal of economic slowdown, which is pushing bond yields and mortgage rates lower,” said Leslie Preston, senior economist at TD.
In the U.S., parallel weak employment data—adding just 22,000 nonfarm payroll jobs against expectations of 100,000—has lowered the 10-year Treasury yield to 4.26%, indirectly easing pressure on Canadian fixed mortgage rates, which are tied to bond market movements. “The U.S. and Canadian economies are showing synchronized softness, and that’s a recipe for lower rates,” noted Colin Robertson, a mortgage analyst at The Truth About Mortgage.
The lower rates are providing some relief for Canadian borrowers, particularly those facing renewals. Approximately 1.2 million mortgages, many secured at rates below 1% in 2020-2021, are set to renew in 2025, with borrowers bracing for significantly higher payments. Variable-rate mortgages, which move with the BoC’s policy rate, are seeing renewed interest, with forecasts suggesting they could drop to 4% by mid-2025 and as low as 3.5% by early 2026, according to ratefair.ca.
However, the outlook isn’t entirely rosy. Inflation, reported at 1.7% in July 2025, remains a critical factor, with core inflation at 3.0% due to trade war pressures. The upcoming Consumer Price Index (CPI) report on September 16, 2025, will be pivotal. “If inflation ticks higher, the BoC may pause cuts, which could stall the mortgage rate decline,” warned Penelope Graham, a mortgage rate expert at Ratehub.ca. Trade disputes, particularly U.S. tariffs on Canadian exports like steel and autos, are adding uncertainty, potentially pushing up costs and inflation.
For homebuyers and refinancers, the current rate dip offers a window of opportunity. “We’re seeing a surge in refinance inquiries as homeowners lock in lower rates,” said Victor Tran, a Toronto-based mortgage broker with Ratesdotca. Yet, with home prices rising—Montreal reported a 7% increase in single-family home prices to $633,250 in August—affordability remains a challenge, especially for first-time buyers.
As the BoC navigates a weakening economy and sticky inflation, the trajectory of mortgage rates hinges on the delicate balance between labor market woes and price stability. For now, Canadians are capitalizing on 2025’s lowest rates, but the September CPI and BoC decision will determine whether this relief endures.
Sources: Canadian Mortgage Trends, Statistics Canada, The Truth About Mortgage, Ratehub.ca, Ratesdotca, cadtod.com, Mortgage Sandbox, Yahoo Finance