5-Year Cash Back Mortgage Rates

Rates Updated: May 18, 2012 8:54 AM

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.	Prepayment 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.
4.73% 5% Cash Back	The Mortgage Emporium	60 days	Lump Sum: 20% Monthly: 20%	$- Get Details
4.79% 3% Cash Back	FirstLine Mortgages	75 days	Lump Sum: 20% Monthly: 20%	$- Get Details
4.87% 5% Cash Back	Safebridge	90 days	Lump Sum: 0% Monthly: 0%	$- Get Details
5.19% 5% Cash Back	PC Financial	120 days	Lump Sum: 20% Monthly: 25%	$- Get Details
5.44% 5% Cash Back	TD Bank	120 days	Lump Sum: 15% Monthly: 100%	$- Get Details

5-year fixed rates Ontario

- A subset of mortgage rates in Ontario is 5-year fixed mortgage rates.

- 5-year fixed mortgage rates are driven by 5-year government bond yields.

- A 5-year term is a popular choice for Canadians, with close to 66% of Canadians choosing this mortgage product.

Basics of Ontario 5-year fixed rates

The numerical value ‘five’ in 5-year fixed mortgage rate refers to the term period of the mortgage, as opposed to the amortization period. This is the length of time for which you lock in your mortgage rate with a certain lender. After this specified time period has elapsed, you must renew your mortgage at the current mortgage rate available, with any lender of your choice.

The word ‘fixed’ in 5-year fixed mortgage rate means that the mortgage rate is constant for the entire term. The percentage rate you lock in, for example 3.5%, will apply to your mortgage over the term.

The 5-year fixed mortgage rate serves as an affordability benchmark that all borrowers must meet, even if they decide on a mortgage with a shorter term and lower interest rate. The reasoning is that this reduces the risk to the lender as well as provides borrowers with a margin of safety.

A closer look at 5-year fixed rates in Ontario

An advantage of a 5-year fixed rate in Ontario is that you essentially lock in the rate and do not need to keep track of it. It is easy for budgeting purposes, because you will know exactly what your mortgage payments will be each month and is a good option for people who prefer consistency. There is no real risk involved, because as opposed to a variable mortgage rate, a fixed mortgage rate does not fluctuate.

However, with an Ontario 5-year fixed mortgage rate, you run the risk of paying higher interest rates when variable rates drop.

It is advisable that you lock in your Ontario 5-year fixed rate when fixed rates are low and the spreads between shorter term rates or variable rates are smaller.

What determines Ontario 5-year fixed mortgage rates?

Fixed mortgage rates follow bond yields which are influenced by economic factors such as inflation and unemployment. When Canada Bond Yields rise, mortgage lenders find it more costly to source capital to fund mortgages and as a result, their profit is reduced. To counter this, mortgage lenders raise mortgage rates. When the market conditions are good, the reverse scenario takes place.

Mortgage lenders set the spread between bond yields and mortgage rates based on the competition, their desired market share, market conditions and marketing strategy.

Source:

http://blog.canadianmortgageadvisor.ca/2011/06/bond-yield-is-falling-and-taking.html

Ontario Home Sales 2011

A recent home sales report by Scotiabank stated that Ontario real estate sales will stay close to the 10-year average, but fall about 15 percentage points below peak in 2007. [1]

According to the Toronto real estate board, the number of sales for the first 2 weeks in June 2011 was up by 16 percent from 2010. The average selling price reported by Greater Toronto REALTORS® was up by 9% to $477,853. [2]

Conversely, in Ottawa, the Canadian Mortgage and Housing Corporation (CMHC) reports a general 6 % decrease in housing sales in 2011 from 2010. [3]

Sources:

[1] http://swo.ctv.ca/servlet/an/local/CTVNews/20110301/housing-sales-in-canada-110301?hub=SWOHome

[2]http://www.torontorealestateboard.com/consumer_info/market_news/index.htm

[3] http://www.obj.ca/Real-Estate/Residential/2011-05-30/article-2545264/CORRECTION%3A-Ottawa-resale-market-to-cool-in-2011%3B-sales-to-fall-6%25%3A-CMHC/1

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.

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