Market U-Turn: BoC Pauses, Fixed Rates Rise, and Rents Soften (Dec 12 Update)

Mortgage Minute: December 12, 2025

The narrative in the Canadian mortgage market has flipped fast. For months, the story has been about “how low will they go?” But this week, the data is asking a different question: “Are we done?”

Here is your Mortgage Market Update for the week of December 12, 2025.

1. The “Pause” is Officially Here

The Bank of Canada held its key interest rate at 2.25% this week. This keeps the prime rate at 4.45%.  Governor Tiff Macklem signalled that this is likely the “right level” for now, effectively pouring cold water on the idea of further aggressive cuts in early 2026. The “freefall” period for variable rates appears to be over.

2. The Fixed Rate Reversal

While the variable rate held steady, fixed rates are moving in the opposite direction. A surge in bond yields following strong jobs data has pushed many 5-year fixed rates back above the 4% mark.

I can still find exceptions for specific files, but the “whisper specials” we saw in November are evaporating. If you were waiting for the absolute bottom to lock in a fixed rate, that window is closing fast.

3. A Shift in Toronto Rentals

For the first time since the pandemic, the vacancy rate for purpose-built rentals in Toronto has climbed to 3%. We are even seeing average rents on turnover decline in the city as landlords compete for tenants. This is a critical metric for investors to watch as they calculate cash flow.

What This Means For You

The market has pivoted from “rates will drop” to “the floor is in.” This change directly impacts your borrowing power and your monthly carrying costs.

If you are shopping with a pre-approval from last month, your numbers might be wrong.

Don’t make decisions based on yesterday’s math.