2024 Is Ending. Here’s What To Expect In 2025 For Mortgages And Interest Rates
As 2024 comes to a close, we saw drastic decreases with interest rates. Our first mortgage closing of the year in January 2024 had a fixed interest rate of 6.39%.
6.39% for a 5-year fixed rate with a major Canadian bank.
6.39%. You read that right.
You’re probably wondering, what was the last mortgage you funded in December? Good question. It was a 3-year fixed rate for...
4.39%. WOW!
That’s an entire 2.1% decrease. Hard to believe.
So, where will interest rates be in 2025?
The truth is that fixed rates have probably hit their bottom. Bond yields are still relatively high compared to the economy, and that’s because of the Canadian dollar's downturn. And that doesn’t look like it’ll change any time soon.
But that’s likely not the same result for variable rates.
As of right now, variable rates are expected to fall 1-1.25% by the end of 2025. Depending on who you ask. Here are what the 6 major banks are predicting by December 2025.
If you believe RBC’s prediction, variable rates will be down a full 1.25%. Right now, we’re at a policy rate of 3.25%. The best variable rate you will receive is 4.65% on the market.
Another 0.75%, and you’ll end at 3.90%. That’s not too bad. In other words, variable rates could be lower than fixed rates by the end of the year.
Here’s where I’ll leave off:
If you like knowing your payment and not having to wonder where you’ll be in the next 6 months, take a fixed rate. BUT, if you don’t mind a bit of volatility, a variable rate could be right for you.
TL;DR:
Fixed mortgage rates are likely at their lowest after a significant drop in 2024.
Variable rates are expected to fall by 1-1.25% in 2025, possibly below fixed rates.
Choose fixed for payment stability and variable for potential savings with volatility.
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