September 2025 Mortgage Renewal Strategies: Locking in or Rolling the Dice on Rates?
For thousands of Canadian homeowners, September 2025 marks a pivotal moment. With roughly 1.2 million mortgages up for renewal this year, many are faced with a crucial decision: should you lock in a fixed rate for the security it offers, or "roll the dice" on a variable rate in the hope of further cuts?
The rate environment today is dramatically different from five years ago. This blog post will break down the current landscape, weigh the pros and cons of fixed and variable mortgages, and provide practical strategies to help you make the best choice for your financial future.
The Current Rate Environment: What You Need to Know
The Bank of Canada’s recent decisions are at the heart of the matter. Following a series of rate cuts totalling 225 basis points between mid-2024 and early 2025, the BoC has held its target for the overnight rate steady at 2.75% since March. The next announcement is scheduled for September 17, 2025.
- Fixed Rates: These are primarily influenced by government bond yields, particularly the 5-year Canada bond yield. While the BoC’s holds have created some stability, the bond market remains sensitive to economic data and global events. As of early September 2025, the best 5-year, insured fixed mortgage rates hover around 4.09%.
- Variable Rates: These are directly tied to your lender’s prime rate, which moves in lockstep with the BoC's overnight rate. With the BoC holding its policy rate at 2.75%, the prime rate has remained stable at 4.95%. This means that variable-rate payments have not changed in recent months, offering a period of calm for those who chose this option.
Fixed vs. Variable: A Breakdown of the Pros and Cons
The choice between a fixed and variable rate at renewal is personal, with no single "right" answer. Your decision should align with your financial situation and risk tolerance.
Mortgage Type
Pros
Cons
Who It's For
Fixed-Rate
Stability & Peace of Mind:
Your payment and interest rate are locked in for the term, providing predictability for your household budget.
Missed Opportunity:
You could miss out on savings if rates fall further over your term.
Homeowners who prioritize budget certainty and have a low tolerance for risk.
Variable-Rate
Potential for Savings:
If the Bank of Canada cuts rates further, your payments will decrease, saving you money.
Uncertainty:
While a rate hike seems unlikely, payments could increase if unexpected economic factors force the BoC’s hand.
Homeowners with a healthy emergency fund who can absorb payment fluctuations and are comfortable with some risk.
| Mortgage Type | Pros | Cons | Who It's For |
|---|---|---|---|
| Fixed-Rate | Stability & Peace of Mind: Your payment and interest rate are locked in for the term, providing predictability for your household budget. | Missed Opportunity: You could miss out on savings if rates fall further over your term. | Homeowners who prioritize budget certainty and have a low tolerance for risk. |
| Variable-Rate | Potential for Savings: If the Bank of Canada cuts rates further, your payments will decrease, saving you money. | Uncertainty: While a rate hike seems unlikely, payments could increase if unexpected economic factors force the BoC’s hand. | Homeowners with a healthy emergency fund who can absorb payment fluctuations and are comfortable with some risk. |
The Forecast: What Experts Are Predicting
The consensus among economists is that the BoC's rate-hike cycle is firmly in the rearview mirror. However, there's a split on the timing and pace of future rate cuts.
- Most economists expect the BoC to begin a new round of rate cuts in late 2025, with many forecasting the policy rate to drop to as low as 2.25% by year-end.
- Some analysts are more cautious, believing the BoC will hold the rate for the remainder of 2025 to monitor inflation and economic growth, with cuts likely to begin in 2026.
The long-term outlook is for a gradual decline in interest rates, but it's important to remember that these are just forecasts. Unexpected events, such as new trade tariffs or a shift in the global economy, could alter this trajectory.
Strategies for a Successful Renewal
Whether you choose a fixed or variable rate, the renewal process itself is an opportunity to save thousands of dollars. Don't simply sign the renewal offer your bank sends you.
- Start Early: Begin the process at least 4-6 months before your renewal date. This gives you ample time to shop around and get pre-approved for a rate with another lender.
- Don't Auto-Renew: Your current bank's renewal offer is rarely their best offer. Use a competitor's mortgage offer as leverage to negotiate a better rate.
- Negotiate: Your credit history, equity in your home, and financial health all give you leverage. Be prepared to ask for a discount, as lenders would rather keep your business than lose it.
- Consider All Options: Think beyond the term and rate. Can you change your amortization period to lower your monthly payment? Are the prepayment privileges sufficient for your needs? A mortgage professional can help you explore all of these options.
Conclusion: Making the Right Choice for You
Renewing your mortgage is one of the most significant financial decisions you'll make as a homeowner. Recent interest rate volatility, present stable rates and potential for future cuts tell us that the rate environment can change.
The best strategy is to be proactive and informed. While the choice between fixed and variable is essential, the most critical step is to shop around and negotiate for the best deal possible.
Frequently Asked Questions
When is the next Bank of Canada interest rate announcement?
The following scheduled interest rate announcement from the Bank of Canada is September 17, 2025.
What is the current prime rate in Canada?
As of August 2, 2025, the prime rate in Canada is 4.95%.
Will the BoC cut interest rates in 2025?
While nothing is guaranteed, most economists and market analysts expect the Bank of Canada to begin cutting rates later in 2025, with some predicting a reduction as early as the September meeting.
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About The Author
Don Scott
Don Scott is the founder of a challenger mortgage brokerage that is focused on improving access to mortgages. We can eliminate traditional biases and market restrictions through the use of technology to deliver a mortgage experience focused on the customer. Frankly, getting a mortgage doesn't have to be stressful.
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