26 Mar Mortgage Rate War 2025: Big Bank Strategies Explained

As we move through 2025, Canada’s mortgage market is undergoing a notable shift. Major banks are lowering mortgage rates in response to declining bond yields, triggering increased competition across the lending landscape. This “mortgage rate war” is giving homebuyers and renewing borrowers new opportunities to save, especially in active real estate regions like Abbotsford, Surrey, and surrounding areas.

Understanding what’s driving this rate environment — and how to respond — is key for anyone looking to enter the housing market or refinance an existing mortgage.

Bond Yields and Their Influence on Mortgage Rates

One of the most important indicators for mortgage pricing in Canada is the yield on government bonds, especially the 5-year Government of Canada bond. These yields have fallen steadily in early 2025 due to several macroeconomic factors:

• Global economic uncertainty has increased demand for stable, lower-risk investments like Canadian bonds.
• Expectations that the Bank of Canada will continue to ease monetary policy have pushed yields down further.
• Investor sentiment is shifting in favour of long-term fixed income as inflation begins to stabilize.

Since fixed mortgage rates are closely tied to bond yields, these declining yields have prompted banks and other lenders to begin cutting their fixed-rate mortgage offerings, particularly on popular terms like 3- and 5-year fixed.

The Role of the Bank of Canada

The Bank of Canada plays a direct role in shaping variable mortgage rates through its overnight lending rate. As of March 2025, the Bank has reduced this rate to 2.75%, marking seven consecutive cuts aimed at supporting economic growth amid tariff pressures and sluggish consumer spending.

Variable mortgage rates, which fluctuate with changes in the overnight rate, have adjusted downward in tandem. While the full impact of these changes is still working through the economy, borrowers with variable-rate mortgages are already seeing a reduction in their monthly payments.

How Lenders Are Competing

Canada’s major banks — including RBC, TD, Scotiabank, BMO, CIBC, and National Bank — have all responded to this environment by adjusting their mortgage strategies:

Promotional Fixed Rates

Several lenders are now offering promotional 5-year fixed rates below 4.75%, particularly for highly qualified borrowers. These rates are often time-sensitive and may require:

• Pre-approval within a limited window
• Strong credit profiles
• Stable employment and income verification

While advertised rates remain higher, the best offers are typically found through brokers or direct negotiation, depending on the borrower’s profile.

Retention Through Rate Matching

Lenders are also focusing on client retention by offering rate-matching programs at renewal time. This allows current borrowers to access more competitive terms without switching institutions — an important strategy in a softening housing market.

Flexible Porting Options

As more homeowners move within or between cities like Abbotsford and Surrey, banks are promoting flexible mortgage porting options to help retain clients who are selling and buying simultaneously. Porting lets borrowers transfer their existing mortgage and rate to a new property, avoiding early termination penalties and rate hikes.

First-Time Buyer Incentives

To attract younger Canadians and newcomers to the market, some banks are rolling out incentives such as:

• Cashback offers on funded mortgages
• Lower interest rates on insured mortgages
• Credit toward legal or closing costs

These incentives are designed to compete with offers from brokers and non-bank lenders, which have also gained market share.

The Impact for Local Buyers

For buyers in areas like Abbotsford and Surrey — where average home prices remain elevated — even modest rate reductions can lead to significant long-term savings. A difference of 0.25% on a $600,000 mortgage can result in thousands of dollars saved over the course of a five-year term.

Additionally, many buyers who were priced out during peak interest rate periods in 2023 may now find the market more accessible, especially with increased lender competition and improved affordability projections for the year ahead.

Mortgage Renewals Under the Microscope

For homeowners with mortgages coming up for renewal in 2025, this rate war presents both a challenge and an opportunity. Those who locked in at record lows in 2020-2021 may still face higher renewal rates — but the current downward trend is narrowing the gap.

Some strategies for renewing borrowers include:

• Exploring shorter-term fixed rates while the market trends downward
• Considering a switch to variable for more flexibility in a declining rate cycle
• Working with a mortgage professional to access rates not publicly posted

Staying informed and acting at the right time could mean the difference between overpaying and locking in a more favourable rate for the next stage of homeownership.

FAQs – Mortgage Rates and Trends in 2025

1. Why are mortgage rates falling now?

Mortgage rates, particularly fixed rates, are falling due to a drop in government bond yields and expectations of continued monetary easing by the Bank of Canada. Lower bond yields mean lenders can fund mortgages at a lower cost, which is reflected in their offerings.

2. Are fixed or variable rates better right now?

It depends on your risk tolerance and timeline. Fixed rates provide certainty, while variable rates offer the potential for lower payments if the Bank of Canada continues cutting rates. Many borrowers are now exploring shorter fixed terms to keep their options open.

3. What’s the best way to access the lowest rate?

While big banks have begun reducing their rates, the lowest offers are often available through mortgage brokers who can compare multiple lenders. Factors like credit score, income stability, and loan-to-value ratio also influence your qualifying rate.

4. How long will these low rates last?

Promotional rates often have short timelines, and while market conditions suggest rates may stay low for several months, they can adjust quickly based on economic data. Getting pre-approved can secure a rate hold while you shop for a home or prepare for renewal.

5. Can I negotiate with my current lender at renewal?

Yes. Many lenders are willing to negotiate better terms to keep your business. Shopping around or speaking with a mortgage broker can give you the leverage needed to negotiate more effectively.

Timing the Market: Should You Lock in Now?

With fixed and variable rates both trending lower, the question for many borrowers is whether to lock in a rate or hold off in hopes of deeper cuts.

Consider Locking In If:

• You’re risk-averse and want payment stability.
• You qualify for a competitive short-term fixed rate.
• You expect to stay in your home long term and don’t want to worry about fluctuations.

Consider Waiting or Going Variable If:

• You believe rates will continue falling in the next 12–18 months.
• You want the flexibility to convert to fixed later.
• You’re planning to move or refinance in the near term.

In uncertain markets, many borrowers opt for shorter fixed terms (1-3 years) as a middle-ground solution, offering lower rates than longer terms while avoiding the full volatility of variable products.

Comparing Lenders Beyond the Posted Rate

It’s tempting to chase the lowest advertised rate—but the actual cost of borrowing involves more than just interest.

Key Factors to Compare:

• Prepayment privileges: Can you pay down your mortgage faster without penalty?
• Portability: Can you move your mortgage if you sell your home?
• Penalty calculations: Some lenders use more borrower-friendly formulas.
• Flexibility for refinancing: Will you face restrictions or extra fees if you want to switch lenders mid-term?

Mortgage professionals can help you evaluate these terms across multiple lenders, including non-bank and alternative providers that may offer better flexibility than traditional banks.

Mortgage Renewal Strategy in a Rate War

If your mortgage is up for renewal in 2025, you’re in a strong position to negotiate. Lenders are motivated to retain clients and are often willing to match or beat competitor offers.

Renewal Tips:

• Don’t automatically sign the lender’s first offer.
  Renewal notices are often sent with less-than-competitive rates.
• Start shopping early.
  You can begin the renewal process up to 120 days before your term expires.
• Consider switching lenders.
  If another institution offers a better rate or more favorable terms, it may be worth the switch—even with legal or appraisal fees.

For homeowners in areas like Surrey and Abbotsford, where home values have held steady or appreciated, renewal is also a great time to explore refinancing for debt consolidation or equity access.

Using a Broker vs. Going Direct to a Bank

One of the biggest strategic advantages in this market is working with a licensed mortgage broker. Unlike banks, which only offer their own products, brokers can:

• Shop rates across multiple lenders, including banks, credit unions, and monoline lenders.
• Access discretionary rates not publicly advertised.
• Navigate complex applications—especially for self-employed borrowers or those with unique income situations.

For many borrowers, especially in competitive regions like the Fraser Valley, brokers provide more personalized and cost-effective solutions than banks alone.

Planning Ahead: Affordability Still Matters

Even as mortgage rates decline, affordability challenges persist, particularly for first-time buyers. The average home price in many BC cities remains well above $700,000. As such, rate savings must be paired with long-term planning.

Best Practices for Buyers in 2025:

• Get pre-approved before shopping.
  This helps lock in a rate and define your budget.
• Review your total debt load.
  Keeping your total debt service ratio (TDS) below 40% improves approval chances.
• Use government incentives wisely.
  Programs like the First-Time Home Buyer Incentive or RRSP Home Buyers’ Plan can help reduce upfront costs.
• Budget for more than the mortgage.
  Property taxes, strata fees, insurance, and utilities can impact affordability.

By aligning your mortgage strategy with your long-term financial goals, you can make the most of current rate trends without overextending yourself.

FAQs – Strategic Mortgage Planning in 2025

1. How much can I save if I secure a rate 0.50% lower?

On a $600,000 mortgage amortized over 25 years, a 0.50% lower interest rate could save more than $15,000 in interest over a 5-year term.

2. Should I refinance my existing mortgage now?

Refinancing can make sense if:

• You’re moving from a high-rate mortgage to a lower one.
• You want to consolidate high-interest debt.
• You need access to home equity for major expenses.

However, consider break penalties and closing costs before making a move.

3. How does a mortgage broker get paid?

Brokers are typically paid by the lender upon successful funding of the mortgage. For standard residential mortgages, there is usually no direct cost to the borrower.

4. What if rates drop after I lock in?

Some lenders offer rate drop protection or allow rate adjustments before closing. If rates fall significantly after you’ve locked in, speak with your broker to review your options.

5. Are non-bank lenders safe?

Yes. Many non-bank mortgage lenders in Canada are regulated and secure, and often offer more competitive products than traditional banks, especially for borrowers with non-standard income or credit.

Final Thoughts

Canada’s mortgage rate war is offering a rare window of opportunity for buyers and renewing homeowners alike. Falling bond yields and central bank policy shifts are creating favorable conditions—but only for those prepared to act.

Whether you’re entering the market, renewing your mortgage, or refinancing, strategic planning and lender comparison are more important than ever. For those in Abbotsford, Surrey, and nearby areas, now is the time to evaluate your mortgage needs, compare your options, and make informed decisions that support your long-term financial goals.

If you’re unsure where to start, connecting with a mortgage expert can ensure you’re getting the most competitive solution available in today’s rapidly shifting market.