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2025 Mortgage Rates Outlook: What Montreal Homeowners Need to Know
May 29, 2025 | Posted by: Yelena Markus
2025 Mortgage Outlook: What Montreal Homeowners Need to Know
As of April 16, 2025, the Bank of Canada held its key policy rate at 2.75%, with signals that further rate cuts may be on the horizon. It can take 12 to 18 months for the full impact of previous rate hikes to ripple through the economy, and many Canadians are still adjusting.
With approximately 60% of Canadian mortgages renewing over the next two years, most homeowners will face a notable increase in payments—especially if their last renewal was before the 2022 rate hike cycle. As a trusted mortgage broker in Montreal, Yelena Markus Mortgage Broker is here to help you plan for these changes and secure the best possible financing solution.
Quick Mortgage Rate Snapshot
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Prime rate: 4.95%
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Inflation: 1.7%
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Trend: Interest rates are slowly declining, and further rate cuts are forecasted for mid-to-late 2025
Will Rates Rise Again in 2025?
Highly unlikely. The Bank of Canada has clearly signaled a shift from restrictive monetary policy to a more growth-supportive stance. Most economists agree that more rate cuts—not hikes—are expected throughout 2025.
What the Experts Are Predicting
According to the BoC’s Q1 2025 Market Participant Survey:
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A 25 basis point rate cut is anticipated at the June 4th announcement.
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Another similar cut may follow in July.
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After that, the rate is expected to hold steady at 2.25% through the end of the year.
If global uncertainty or inflation flares again, the BoC could adjust its pace. But for now, the trend appears favorable for borrowers.
Long-Term Outlook for Mortgage Rates
The effects of the aggressive rate hikes of 2022 are still being felt. Historically, the lag time for full economic impact is up to two years. While sales slowed in 2024, home sales are projected to rebound in 2025 and 2026, especially in markets like Montreal where demand remains strong.
With a projected economic growth rate of 2.25% in 2025–2026, supported by falling rates and population growth, many experts predict continued strength in housing. Inflation is expected to stay near the BoC’s 2% target.
What Drives BoC Decisions?
???? Inflation
April’s inflation cooled to 1.7%, driven down by a sharp drop in energy prices. Food and travel saw slight increases, but overall inflation is moving toward the BoC's comfort zone.
As a general rule:
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When inflation rises above 2%, the BoC raises rates.
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When it falls below, rate cuts may follow to stimulate spending.
???? Employment
April 2025 saw:
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Employment largely unchanged across Canada (+7,400 jobs)
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Unemployment at 6.9%
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Quebec adding 18,000 jobs—a strong sign for the local market
The BoC monitors employment closely. Weak job markets could support further rate reductions.
???? The U.S. Economy
In April, the U.S. Consumer Price Index rose 0.2%, keeping the Federal Reserve cautious. U.S. economic trends often influence Canadian monetary policy, especially when inflation and employment diverge across borders.
How Past Trends Inform Today’s Rates
In the 1980s, interest rates spiked dramatically—but debt levels were lower. Today, Canadians owe $1.65 for every dollar earned, compared to just $1 in the U.S. That means every rate hike has a stronger impact on household budgets.
To put things in perspective:
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A $100,000 mortgage at 0.25% = ~$436/month
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At 5.00%, the same mortgage = ~$716/month
This is why navigating today’s rate environment with a professional Montreal mortgage broker like Yelena Markus is more important than ever.
Renewing in 2025? Here's What to Expect
Roughly 1.2 million mortgages in Canada are set to renew this year, most of them originally signed when rates were near historic lows. The result? Payment shock—where monthly payments increase by hundreds, sometimes thousands.
That’s where we step in. Yelena Markus Mortgage Broker offers personalized advice to help you transition smoothly—whether you're looking to refinance, lock in, or switch lenders.
Smart Mortgage Strategies for 2025
1. Base Your Decision on Financial Stability
Focus on:
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Job security
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Emergency savings
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Current debt levels
Stable income? A variable-rate mortgage could save you money if rates drop. Prefer predictability? Choose a fixed-rate mortgage for consistent payments.
2. Match Your Mortgage to Your Life Plan
If you're planning to move or renovate soon, a short-term fixed or variable-rate option may be better. If you're settled and value stability, a longer-term fixed rate could be ideal.
Fixed vs. Variable: What’s Right for You?
✅ Fixed-Rate Mortgages
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Great for budgeting
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Ideal during market volatility
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Influenced by bond yields, not just BoC policy rates
Tip: Watch for drops in bond yields to time your fixed-rate mortgage.
✅ Variable-Rate Mortgages (VRMs & ARMs)
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Adjust with lender prime rate
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May offer savings if rates decline
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ARMs offer dynamic payment adjustments
If you’re financially secure, VRMs or ARMs can be smart tools for rate-sensitive borrowers.
2025 Buyer & Seller Forecast: What You Should Know
With the BoC’s key rate near the neutral range, gradual reductions will likely continue. Experts predict we’ll see cuts to 2.50% by year-end.
Buyers: Don’t wait too long. As rates fall, prices may rebound faster than expected. Acting now while prices are relatively low could save thousands.
Sellers: If you’re equity-rich and have strong cash flow, consider renewing short term and waiting to list once the market rebounds.
Final Word from Yelena Markus Mortgage Broker
Whether you’re buying your first home, renewing your mortgage, or looking to refinance, the market is shifting—and timing is everything.
At Yelena Markus Mortgage Broker, we provide Montreal homeowners with clear advice, competitive options, and personalized service. Let’s find the right mortgage strategy for you in 2025.
Book your free consultation today to get started.
