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3-Year Fixed Mortgage Rates

Mortgage Rate Mortgage rate The rate of interest you will pay on the outstanding balance of your mortgage. This rate can be fixed for the duration of the term or variable, fluctuating with the prime rate. Fixed rates are most popular in Canada and represent 66% of all mortgages.	Provider Provider Mortgage providers include lenders and mortgage brokers. As the name suggests, lenders provide the funding for your mortgage. Mortgage brokers are licensed professionals with access to multiple lenders and products. According to the Canadian Mortgage and Housing Corporation, mortgage brokers accounted for 38% of mortgage originations in 2009.	Rate Hold Rate hold The rate hold is the time period, between 30-120 days, before your mortgage renewal date you are able to lock in the current mortgage rate. If rates go down further within this period, however, many lenders will honour the lower rate.	Pre-Payment Prepayment Prepayment options outline the flexibility you have to increase your monthly mortgage payments or make a lump sum outlay against your mortgage as a whole. According to the Canadian Association of Accredited Mortgage Professionals (CAAMP), 28% of mortgage holders used one or both prepayment privileges in 2010.	Payment Payment The monthly mortgage payment is calculated based on the mortgage amount, amortization period and the associated mortgage rate. A general affordability rule is that your monthly housing costs should not exceed 32% of your gross household monthly income.
2.79%	Scotiabank	90 days	Lump Sum: 15% Monthly: 15%	$- Get Details
2.84%	Marc Crossman	90 days	Lump Sum: 20% Monthly: 20%	$- Get Details
2.94%	True North Mortgage	30 days	Lump Sum: 10% Monthly: 100%	$- Get Details
3.14%	PC Financial	120 days	Lump Sum: 20% Monthly: 25%	$- Get Details
3.18%	CIBC	90 days	Lump Sum: 10% Monthly: 15%	$- Get Details
3.19%	ING Direct	120 days	Lump Sum: 25% Monthly: 25%	$- Get Details
3.39%	FirstLine Mortgages	75 days	Lump Sum: 20% Monthly: 20%	$- Get Details
3.95%	National Bank	90 days	Lump Sum: 10% Monthly: 100%	$- Get Details
3.95%	TD Bank	30 days	Lump Sum: 15% Monthly: 100%	$- Get Details
3.95%	RBC Royal Bank	90 days	Lump Sum: 10% Monthly: 100%	$- Get Details
4.05%	Laurentian	90 days	Lump Sum: 15% Monthly: 15%	$- Get Details
4.05%	Bank of Montreal	90 days	Lump Sum: 20% Monthly: 20%	$- Get Details
4.35%	MCAP	30 days	Lump Sum: 20% Monthly: 20%	$- Get Details

3-year Fixed Mortgage Rates

Historical 3-Year Fixed Mortgage Rates

Mortgage rate is fixed over a 3-year term
20% of Canadians have mortgage terms between 2-4 years
66% of Canadians have fixed mortgage rates
3-year fixed mortgage rates follow 3-year government bond yields

3-year fixed mortgage rates defined

A 3-year fixed mortgage will have a constant rate of interest over a term of three years. The term should not be confused with the amortization period, which is the length of time it takes to pay off your mortgage. The term, rather, is the period you are committed to the contractual provisions and mortgage rate with your lender.

Three-year terms are not the most popular in Canada, but they do make sense under certain circumstances, which are discussed in more detail below.

Comparing 3-year fixed mortgage rates

There are a number of factors supporting the choice of a short-term rate like the 3-year fixed mortgage rate. For one, if you believe you are in a falling interest rate environment, where rates will, in the least, stay stagnant and, at best, fall, shorter terms are more strategic. Instead of being locked in to a rate for years longer, you can take advantage of low rates when your mortgage is up for renewal. Conversely, if you are in a rising interest rate environment, the opposite is true.

Short terms are also sensible if you are likely to break your mortgage within a few years – like, for example, if you want to upgrade your home. Going with a 3-year term over a 5-year term could save you a considerable amount of money in penalty costs.

3-Year Fixed vs. Longer Term Mortgage Rates

Additionally, you will want to consider the market pricing of different terms and the premiums associated with locking in long-term mortgage rates. For instance, if there is a significant premium on a 5-year rate compared to a 3-year rate, it may not be worth buying the two years additional interest rate certainty.

The advantage of a fixed mortgage rate is that your monthly mortgage payments will stay constant and you are protected against interest rate fluctuations; however, variable rates, although exposed to changes in the prime lending rate, have proven to be less expensive when examined historically.

Popularity of 3-year fixed mortgage rates

20% of Canadians have a term between 2-4 years

Term Length	Age group
Term Length	18-34	35-54	55+	All ages
1 year term	5%	7%	6%	6%
2-4 year term	27%	18%	12%	20%
5 year term	66%	65%	69%	66%
6-10 year term	3%	9%	10%	7%
>10 year term	0	0	2%	1%

Source: CAAMP "Annual state of the Residential Mortgage Market in Canada" 2010

Around 20% of Canadians have a mortgage term between two and four years, with this figure slightly higher for younger age groups. Typical to younger demographics, the tolerance for risk is likely higher, with a reduced urgency to lock in rates for long periods of time.

Fixed rates, however, at 66% of all mortgages, are most popular, with little difference in uptake amongst age groups.

What drives changes in 3-year fixed mortgage rates?

Fixed mortgage rates follow government bond yields, with 3-year fixed rates following 3-year government bond yields. Bond yields are driven by economic conditions, and the spread between bond yields and lender-posted mortgage rates vary by a lender's marketing strategy and general credit market conditions.

Source: All data percentages were taken from CAAMP "Annual State of the Residential Mortgage Market in Canada" 2010

Mortgage Amount: Mortgage Amount If you are a first-time homebuyer, the mortgage amount is the price of the home you intend to purchase, minus your down payment. If you are renewing or refinancing your mortgage, this is the value of your the mortgage.	Type:		Term: Term The mortgage term is the amount of time a home buyer commits to the rules, conditions and interest rate agreed upon with the lender. The term can be anywhere from six months to 10 years, with a 5-year mortgage term being the most common duration.
	Province:		Amortization: Amortization The amortization period is the length of time it takes to pay off your mortgage in its entirety. The most common amortization period is 25 years, with the maximum set at 30 years for down payments less than 20%. Although longer amortization periods reduce your monthly payments, you will pay more interest over the life of your mortgage.