Morty's Rate Radar

How Canadian mortgage rates really work — the overnight rate, bond yields, and everything in between, explained visually.

Want to know why your rate went up (or down)?

Let's break it down — no finance degree required. There are really only two numbers that drive every mortgage rate in Canada: the Bank of Canada overnight rate (which moves variable rates) and the 5-year Government of Canada bond yield (which moves fixed rates). Once you understand these two, the rest clicks into place.

Live Rates Dashboard

The key numbers driving Canadian mortgage rates right now.

BoC Overnight Rate

2.75%

Policy rate

Prime Rate

4.95%

Big 6 banks

5-Year GoC Bond

2.68%

Benchmark yield

5-Year Fixed

4.34%

Best market rate

Variable Rate

3.85%

Best market rate

As of April 1, 2025 (sample data)Live market rates at Ratehub.ca

These are the real numbers right now — the best available market rates, not the inflated posted rates you see in bank ads. A good broker can often beat even these. Always shop around.

How Mortgage Rates Are Set

Two different mechanisms for two different mortgage types.

Variable Rates

Variable rates are tied to the prime rate, which moves in lockstep with the Bank of Canada's overnight target rate. When the BoC announces a rate change (usually 8 times a year), the big banks adjust prime within days — and your variable rate adjusts automatically.

The chain:

BoC overnight rate → Prime rate (+ ~2.2%) → Your variable rate (prime ± discount)

Fixed Rates

Fixed rates are tied to 5-year Government of Canada bond yields. Lenders fund fixed mortgages by borrowing in the bond market, so when bond yields rise or fall, fixed mortgage rates follow — plus a lender spread of about 1.5–2% for profit and risk.

The chain:

5-year GoC bond yield → Lender cost of funds → Your fixed rate (bond yield + ~1.5–2%)

Why does this matter?

Fixed and variable rates are driven by completely different forces. The BoC overnight rate is a policy decision made 8 times a year. Bond yields are set by the open market every second of every trading day, driven by inflation expectations, global capital flows, and investor sentiment. That's why fixed rates sometimes move before the BoC does anything — the bond market is pricing in future expectations.

During the 2022–2023 tightening cycle, bond yields spiked before the BoC started raising rates aggressively, which is why fixed rates jumped first. When the market began expecting rate cuts in late 2024, bond yields dropped and fixed rates came down — even before the BoC officially cut.

Here's the key takeaway: if you're watching fixed rates, watch the bond market. If you're watching variable rates, watch the BoC announcements. They're two different games.

Historical Correlation Charts

See how rates have moved together over the last 10 years.

When the Bank of Canada changes the overnight rate, the big banks adjust their prime rate within days — and your variable mortgage rate moves with it.

The gap between the prime rate and the overnight rate has been remarkably stable at around 2.2% for decades. The best market variable rate is typically prime minus a broker discount of 0.5–1.0%.

Data source: Bank of Canada & market rate surveys. Best available market rates shown (not posted bank rates).

What Analysts Are Watching

Context for where rates might head — with massive caveats.

Not financial advice or a prediction

Past performance is not indicative of future results. Markets can change fast and unpredictably. This page is educational context only — always speak to a licensed mortgage professional before making financial decisions.

If the BoC continues cutting...

Variable rates would continue to fall as prime rate drops further. Fixed rates would also ease if bond yields remain low and inflation stays contained. Borrowers on variable rates would see direct relief, while new fixed-rate borrowers would lock in at lower levels.

Watch for: slowing GDP growth, rising unemployment, inflation trending toward the 2% target.

If inflation picks back up...

The BoC would pause or reverse cuts, pushing variable rates back up. Bond yields would spike on inflation fears, dragging fixed rates higher — potentially faster than variable. This is the scenario that caught many borrowers off guard in 2022.

Watch for: sticky core inflation above 3%, hot employment data, commodity price spikes, or global trade disruptions.

Next BoC rate announcement

The Bank of Canada announces rate decisions 8 times per year (roughly every 6 weeks). Check the BoC schedule for the next announcement date. Markets often price in expectations weeks ahead — the bond market moves first.

Morty's honest take: nobody — not the banks, not the analysts, not Morty — can predict rates with certainty. What you can do is understand the mechanics, watch the right indicators, and choose a mortgage structure that fits your risk tolerance. That's what the Mortgage Matcher is for.

Not financial advice or a prediction

Data sourced from the Bank of Canada Valet API and market rate surveys. Best available market rates shown — your actual rate will depend on your lender, credit profile, and down payment. This page is for educational purposes only and does not constitute financial advice.