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Best Alberta 10-year fixed mortgage rates
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A guide to 10-year fixed mortgage rates
Jamie David, Sr. Director of Marketing and Mortgages
A 10-year fixed mortgage will have a constant rate of interest over a term of 10 years. The term is not the same as the amortization period, the amount of time it takes to pay off your mortgage – but, rather, is the period you are committed to the contractual provisions and mortgage rate with your lender. Your monthly mortgage payments will be fixed, and you are protected against interest rate fluctuations.
10-year fixed mortgage rates: Quick facts
- 7% of Canadians have a mortgage term between 6-10 years (Source: CAAMP)
- 74% of Canadians have fixed mortgage rates (Source: Statistics Canada)
- 10-year fixed mortgage rates follow 10-year government bond yields
Comparing 10-year fixed mortgage rates
A 10-year fixed mortgage is the most risk-averse mortgage selection. If you need to budget long-term or believe interest rates will rise dramatically over the coming years, it may make sense. For instance, if you feel certain in five years mortgage rates will be higher than the current quoted 10-year rate, locking in for the long-term is a sound strategy. Your monthly mortgage payments will remain constant over a period of 10 years, and you are protected against interest rate fluctuations.
10-Year Fixed vs. Longer Term Mortgage Rates
10-year fixed rates are typically higher rates than shorter terms (like 3 or 5 years). This is because longer fixed-rate terms lock in a lower rate for a longer period of time. That might be great for you, but it puts the risk of a rate rise onto your lender. The higher rate is therefore a premium for locking in a lower rate for longer.
These relationships aren't always constant however, especially in very low or high rate environments. You should always decide which term is best for you based on the current market and your present circumstances.
It's important to remember that it's very difficult to forecast the direction interest rates will take over such a long period of time, and there are a number of drawbacks to locking into a mortgage rate for 10 years. The foremost argument against a 10-year term is the premium you will pay for passing on the risk of interest rate fluctuations for 10 years.
Another thing to keep in mind is that, after 5 years, the Interest Act states the penalty to break your mortgage cannot exceed 3 months' interest, so you wouldn't need to worry about a potentially much higher Interest Rate Differential (IRD) penalty. However, if the mortgage is broken before 5 years, such a penalty could apply.
Historical 10-year fixed mortgage rates
Looking over historical mortgage rates is the best way to understand which mortgage terms attract lower rates. They also make it easier to understand whether rates are currently higher or lower than they have been in the past.
Popularity of 10-year fixed mortgage rates
With only 7% of Canadians having mortgage terms between six and 10 years, long terms are not a popular choice in Canada. They are even less popular amongst younger age groups at only 3% uptake in ages 18-34.
Fixed mortgage rates, however, are most common, at 74% of all mortgages in Canada with little variation amongst age groups.
(Source: CAAMP)
What drives changes in 10-year fixed mortgage rates?
Fixed mortgage rates follow government bond yields, with 10-year fixed rates following 10-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.