The mortgage market in 2025 is full of tension. Rates are high, renewals are painful, and new buyers face tougher stress tests. Homeowners are watching every move.
In the middle of it all, the big six banks—Royal Bank of Canada (RBC), Toronto-Dominion (TD), Canadian Imperial Bank of Commerce (CIBC), Bank of Montreal (BMO), Scotiabank, and National Bank of Canada—just released their quarter two (Q2) updates.
Their outlooks reveal what is changing, what is not, and what it means for Canadian mortgage rates.
This blog breaks it all down for buyers, owners, and anyone planning their next move in the current real estate market.
Q2 Rate Trends From the Big 6 Banks
Canadian banks moved quickly in Q2 2025 to prepare for possible financial pressure. Four of the big six—RBC, TD Bank, BMO, Scotiabank, CIBC, and National Bank of Canada—each set aside over C$1 billion in loan-loss reserves. These are funds the bank holds in case borrowers default on loans. The CIBC and National Bank also increased their reserves significantly.
Across the six banks, loan-loss reserves jumped by 14.5% to as much as 79%, depending on the bank. For example, BMO raised its reserves by 49%, and TD Bank followed with an increase of roughly 22%.
These changes cut into profits, but serve as a warning. Banks expect more borrowers to struggle with repayment; it is a sign of rising credit stress.
At the same time, forecasts on interest rates differ. The Bank of Canada rate is currently holding at 2.75%. RBC believes it will stay there for the rest of the year. But TD Bank, CIBC, and National Bank see room for more cuts, possibly down to 2.25%.
These trends have a direct impact on Canadian mortgage rates. When banks brace for more defaults, they tighten credit and raise caution. When rate decreases are expected, borrowing may get cheaper.
Why the Bank of Canada Rate Still Matters
The Bank of Canada rate is the foundation of mortgage pricing. It directly affects prime rates, which impact variable mortgages. While the central bank rate recently held steady at 2.75%, the pause signals caution and also keeps borrowers guessing. However, the new projection outlook indicates that the rate will remain unchanged.
If the rate holds, variable Canadian mortgage rates may stay flat. However, if it cuts some later, fixed rates could fall too. Every Bank of Canada rate matters, especially in a tight market like this.
Renewal Pressure and Mortgage Stress Test Outlook
According to the Bank of Canada report, a wave of mortgage renewals is underway. Around 60% of Canadian mortgages are set to renew between 2025 and 2026. For many, the new payments will be high, mainly for those coming off five-year fixed terms. Some will see monthly costs rise by 10% to 20%.
Most borrowers passed the mortgage stress test when they first signed, using higher qualifying rates. While this helps, not everyone is safe. Households with a tight budget will struggle to absorb the increase.
What Ontario Homebuyers and Investors Should Watch For
If your mortgage renewal is coming up in late 2025 or early 2026, start planning now. Look at your options and lock in early if rates seem to rise. Compare fixed and variable loans. Choose based on your comfort with risks and where you think Canadian mortgage rates are headed.
Stay tuned to Bank of Canada updates, as they could help you tell where the rates may go next.
We Are Your Best Bet for Understanding Canadian Mortgage Rates in 2025
Being one of the leading mortgage brokers in Ontario, Northwood Mortgage knows the market and works with a long list of lenders, including banks, credit unions, and private alternatives. This ensures that customers get seamless access to the most competitive Canadian mortgage rates, fixed or variable.
Our experts compare offers, explain your options, and guide you through every step, including mortgage renewal and the mortgage stress test. Call us today at 888-495-4825 or contact us online to speak to one of our experienced brokers. We will find the best fit for your budget, needs, and future.
