Everyone must have noticed that buying a home in Canada has become increasingly difficult over the last few years. Prices are high and competition is fierce. There is also one major factor that many don’t fully understand: mortgage rates. They move up and drop, but they always affect how much you can afford.
In this blog, we will explain what mortgage rates mean in simple terms, alongside what causes these rates to change. This will help homeowners or home buyers know why they matter and how they impact plans to own a home.
What are mortgage rates and why do they fluctuate?
Mortgage rates are simply the cost of borrowing money to buy a home, but they don’t stay still. They shift based on things happening in the economy, and are especially influenced by the Bank of Canada.
In June 2025, the Bank of Canada held its key interest rate steady at 2.75%, after cutting it several times earlier this year. This matters because lenders across the country usually adjust their mortgage rates based on the bank’s decisions. When the rate stays low, borrowing becomes less expensive.
Inflation also has a strong influence. When prices rise too fast, the Bank of Canada usually raises rates to cool things down. Right now, inflation in Canada has eased, which keeps interest rate trends more stable—at least, for now.
The Link Between Mortgage Rates and Home Affordability
Mortgage rates have a direct impact on how buyers can afford a home. When rates go up, monthly payments rise, which means home buyers can qualify for a smaller mortgage. On the flip side, when rates fall, borrowing becomes cheaper, and people can afford more.
Let’s say that a buyer is looking at a home worth $600,000. At a 5% mortgage rate, the monthly payment (on a 25-year term with 20% down) might be around $2,800. However, if mortgage rates drop to 4%, that payment could shrink to about $2,500. It’s the same home, but at a lower rate—big difference.
Even a small change in rates can knock tens of thousands off your approved mortgage amount. In essence, mortgage rates decide more than just numbers on a loan. They shape real buying power and can make or break home affordability in today’s market.
Interest Rate Trends in Ontario: What Buyers Should Know
Recent interest rate trends in Ontario are showing some signs of relief. Inflation has cooled and is now sitting close to the Bank of Canada’s 2% target. While this is good news, shelter costs are still high and pushing prices up.
The next rate announcement is set for July 30th. A new forecast data projects that the bank could lower its rate again (maybe by 25 basis points) if inflation stays steady and global pressures don’t worsen. Buyers should pay close attention to these trends, as timing improves home affordability and could save thousands.
How First-Time Buyers and Homeowners Can Ride This Market
Ontario’s real estate market is shaped by changing mortgage rates and trends. Therefore, planning is important. First-time buyers should set a firm budget, get pre-approved, and avoid overextending.
Homeowners thinking of refinancing or upsizing should pay attention to the market. It is important to work with a reliable mortgage broker who can guide you, track interest rate trends, and move smartly.
Northwood Mortgage Is Your Ally in Ontario’s Mortgage Rate Maze
Mortgage rates can be tricky, but you don’t have to figure it out alone. At Northwood Mortgage, we search our varied pool of lenders, which consists of banks, credit unions, and private lenders, to find a rate that fits your life now and later.
We are local and truly understand Ontario’s market inside out. Our expert brokers will guide you through every step. Reach out to Northwood Mortgage today at 888-495-4825 or contact us online to improve your home affordability and make your mortgage journey direct and stress-free.
