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Inheriting a home in Canada can be life-changing occurrence, one that is fraught with sadness (it means you’ve lik...
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The best current mortgage rates in Canada
Check out today's best mortgage rates in Canada by type and term.
Rates are based on an average mortgage of $300,000
| Insured ? | 80% LTV ? The rates in this column apply to mortgage amounts between 65.01% and 80% of the property value. The home must be owner-occupied and have an amortization of 25 years or less. You must have purchased it for less than $1 million. These rates are not available on refinances. Refinances require "Uninsured" rates. | 65% LTV ? The rates in this column apply to mortgage amounts that are 65% of the property value or less. The home must be owner-occupied and have an amortization of 25 years or less. You must have purchased it for less than $1 million. These rates are not available on refinances. Refinances require "Uninsured" rates. | Uninsured ? | Bank Rate ? | ||
|---|---|---|---|---|---|---|
Insured 4.99% | 80% LTV 5.6% | 65% LTV 5.6% | Uninsured 6.69% | 7.09% | ||
Insured 5.67% | 80% LTV 5.3% | 65% LTV 5.3% | Uninsured 6.04% | 6.39% | ||
Insured 4.79% | 80% LTV 4.94% | 65% LTV 4.94% | Uninsured 4.94% | 5.64% | ||
Insured 4.94% | 80% LTV 4.94% | 65% LTV 4.94% | Uninsured 5.09% | 5.49% | ||
Insured 4.74% | 80% LTV 4.79% | 65% LTV 4.79% | Uninsured 4.94% | 5.04% | ||
Insured 4.94% | 80% LTV 5.29% | 65% LTV 5.29% | Uninsured 5.09% | 5.9% | ||
Insured 5.74% | 80% LTV 5.89% | 65% LTV 5.89% | Uninsured 5.84% | 7.25% | ||
Insured 6.1% | 80% LTV 6.7% | 65% LTV 6.7% | Uninsured N/A | 8.6% | ||
Insured 5.9% | 80% LTV 6.1% | 65% LTV 6.1% | Uninsured 6.25% | 6.89% | ||
Insured 7.2% | 80% LTV 7.2% | 65% LTV 7.2% | Uninsured 7.2% | N/A | ||
Insured 6.74% | 80% LTV 6.79% | 65% LTV 6.79% | Uninsured 5.25% | N/A |
What is a 5-year fixed mortgage?
A 5-year fixed mortgage has an interest rate that remains the same throughout the term of the mortgage, in this case 5-years. It does not increase or decrease with the change in overnight prime rate by the Bank of Canada. The interest rate and mortgage payments do not fluctuate until it's time for renewal or the borrower decides to refinance.
In the last two years, from 2022-2023, high inflation has led to rapidly increasing interest rates which has caused the cooling of housing markets across Canada and decelerated mortgage growth.
Mortgage borrowers are opting for shorter-term fixed-rate mortgages, with fixed-rate 5-year mortgages falling to less than 15% of new mortgages, and variable-rate mortgages dropping to less than 20% of new mortgages, according to a CMHC Residential Mortgage Industry Report.
How do 5-year fixed mortgages work in Canada?
Canadians entering the homebuying market and looking for mortgage financing will find they have many options available to them.
One of those, of course, is the 5-year fixed mortgage. Simply, this option allows you to lock in a fixed interest rate for a period of five years. By doing this, risk-averse people can sleep at night knowing their mortgage rates, and monthly payments, will remain constant for a specific period, even if interest rates rise (or fall for that matter).
Having a fixed rate for a specific amount of time allows you to budget and save accordingly for other aspects of your life. You have the peace of mind that your rates will not be at the mercy of inflation or Bank of Canada decisions.
5-year fixed mortgage rates are also very popular and considered a good middle ground choice for homebuyers. Because of their popularity, the 5-year fixed rates are often the most competitive, which is also appealing to consumers.
Fixed rates tend to be higher than variable rates because you are paying a bit more for budget security. Fixed rates are mainly influenced by Bank of Canada bond yields (which are also set for 5 years) and changes in the bond market — and are set by them accordingly.
When rates are low, some homebuyers will consider variable mortgage rates, but their link to the change in interest rates can make them volatile. Homebuyers might find their rates going up dramatically, as has been the case recently as inflation has risen. That is why when interest rates rise, people like to lock into a 5-year fixed rate to ensure stability of payments and budgeting.
5-year fixed-rate mortgages in Canada: What you need to know.
The mortgage type most favoured by Canadians is the 5-year fixed-rate mortgage. Five years is long enough to provide a sense of stability while also allowing room for Canadians who want to take advantage of shifting interest rates.
Keep reading to learn more about how to qualify for the lowest rates on 5-year fixed mortgages.
If you’re ready to compare 5-year fixed mortgage rates right now, choose one of the options above. If you’re renewing, refinancing, or are a first-time homebuyer, LowestRates.ca can help you find a cheaper rate.
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The pros and cons of a 5-year fixed mortgage in Canada
Let’s face it. You don’t love risk. Taking a mortgage is a big step, and you want to make sure you can sleep at night, knowing you can pay down your debt and do it securely. Here are some pros and cons to consider for taking out a 5-year fixed mortgage in Canada.
Pros of 5-year fixed mortgage rate
Here’s why you would consider a 5-year fixed mortgage rate:
Stability: The 5-year fixed term means your mortgage payments remain unchanged for the entire duration of your loan. Stability can be especially beneficial for budgeting purposes on your other home or personal needs.
Security: The longer-term commitment offers a sense of security, shielding you from the volatility of sudden changes in interest rates or inflation.
Less Renegotiation: With a 5-year fixed mortgage in Canada, you won’t have to renegotiate your mortgage as frequently, saving you time and potentially money.
Cons of 5-year fixed mortgage rate
Here are some of the reasons you may not want to consider a 5-year fixed mortgage rate:
Limited Flexibility: A 5-year mortgage fixed rate provides peace of mind but is not inherently flexible, as opposed to a 5-year variable rate, which does allow for early renewal into a fixed rate term equal to the remaining term of your variable mortgage without penalty.
Fear of Missing Out: If market interest rates fall, you’ll be stuck paying the higher rate until your term ends.
Higher Penalties: Penalties from your lender can be high if you choose to break the terms of your 5-year fixed rate mortgage. Interest rate differential penalties on fixed mortgage rates increase when paying out a mortgage with a currently higher rate in a lower rate environment.
Frequently asked questions about 5-year fixed mortgages
Answers to all your questions about 5-year fixed mortgages can be found here...
When should you consider a 5-year fixed-rate loan?
A 5-year fixed-rate mortgage is the most popular mortgage rate in Canada — and for good reason. It offers the perfect balance of great rate and desirable terms. A 5-year fixed rate should be considered by every borrower, since it’s provided by all mortgage lenders and, therefore, one of the easiest to compare to find the best rate. According to Mortgage Professionals Canada, 74% of all mortgages funded in 2020 were fixed-rate mortgages and the majority of those were five-year terms.
Are 5-year fixed-rate mortgages better than other mortgage terms?
This is a personal matter that depends on your budgetary needs/constraints and your tolerance for risk. Some homebuyers like the flexibility of a variable rate mortgage and prefer that advantage. Others like the stability of a set payment for a fixed amount of time. Talk to your lender about what suits your needs best.
What is a good 5-year fixed mortgage rate?
Getting a good rate is part of a multi-layered process. When you talk to lenders, they’ll want to know things like your income and employment history, the size of your down payment, credit score, debt levels, and assets. If you are a minimal risk and have good credit, you will probably be offered favourable rates by your lender. Since mortgage rates are constantly fluctuating, it’s important to compare your options to ensure you’re getting the best mortgage for your particular situation.
How is the 5-year fixed mortgage rate set?
All fixed-rate mortgages in Canada are influenced by the government bond market. A bond is a type of investment offered by banks and lenders where the investor lends the government a set amount of money for a predetermined amount of time. In exchange, the government provides a set amount of interest for the investor that is earned over time. Once a bond’s term is up, the principal investment is returned to the investor. When bond yields go up, fixed rates go up and when bond yields go down, fixed rates go down. The reason for this is that since bonds are one of the safest types of investments, lenders use them to cover the cost of mortgages.
How much can you save comparing 5-year fixed rates in Canada with LowestRates.ca?
LowestRates.ca has helped our users save $1 billion in interest and fees. Because mortgage amortization periods in Canada are long, typically ranging from 25 to 30 years, the amount of money you can save over the life of a mortgage is significant, even if you’re only saving a fraction of a percentage point during each of your mortgage terms.
Joel Kranc
About the Author
Joel Kranc is an award-winning writer, author and journalist. Most of his experience lies within the institutional investment and financial services space. He also covers a variety of business topics for publications in North America and the UK.
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