Best 2-year fixed mortgage rates
What are 2-year fixed mortgage rates?
The '2' in a 2-year mortgage rate represents the term of the mortgage, not to be confused with the amortization period. The term is the length of time you lock in the current mortgage rate, while the amortization period is the amount of time it will take you to pay off your mortgage. The term acts like a reset button on your mortgage, at which point you must renew the mortgage at a rate available at the end of the term. A mortgage might, for example, have a 2-year term and a 25-year amortization period.
When the mortgage rate is 'fixed', it means that the rate (%) is set for the duration of the term, whereas with a variable mortgage rate, the rate fluctuates with the market interest rate, known as the 'prime rate'. So, for example, if the 2-year fixed mortgage rate is 4%, then you will pay 4% interest throughout the term of the mortgage.
It's worth noting that all borrowers, even those applying for a 2-year term, will need to meet the standards of approval for the 5-year mortgage rate. This is a standardized benchmark applied to reduce the risk for the lender and to give the borrower some breathing room.
Is it possible to get a 2-year mortgage?
While variable-rate mortgages are generally not available in 2-year terms, you can certainly get a 2-year fixed-rate mortgage. In fact, numerous lenders including the Big 5 Banks, credit unions and smaller banks all offer 2-year fixed-rate mortgage products. For a full range of 2-year fixed mortgage rates from a wide variety of providers, check out our rate table above. It’s updated throughout the day, ensuring that you’re always seeing the best and most current 2-year fixed mortgage rates on offer.
Is a 2-year fixed-rate mortgage worth it?
A 2-year fixed-rate mortgage is definitely worth it if you want the security of having fixed, unchanging mortgage payments for a relatively short period of time. Much of this has to do with your appetite for risk, and whether you are optimistic or pessimistic about the near-term future of mortgage rates.
For example, if you are one of the many Canadians who were alarmed by the Bank of Canada’s ten rate hikes from March 2022 to July 2023, you may want a fixed mortgage rate right now to protect yourself from potential rate increases. However, you may also have seen that the Bank of Canada chose to hold its target for the overnight rate steady in its most recent September 6 announcement, and that the Bank seems committed to a rate hold stance for the foreseeable future so long as inflation continues to trend downward.
It’s not unreasonable to think that if inflation keeps declining and then comes in line with the Bank of Canada’s goal of 2-3%, there could then be rate cuts. However, given that the latest Consumer Price Index figures from August show inflation is still at 4%, it’s also not unreasonable to think that it may be at least a year before the rate of inflation has declined enough for the central bank to consider lowering the target for the overnight rate. Many experts believe that rates could come down in 2024 and into 2025. If you share this belief, a 2-year fixed-rate mortgage makes a lot of sense, as it offers protection without locking you in for too long.
Can I change my 2-year fixed mortgage to a 5-year?
As with any mortgage term, at the end of your 2-year mortgage term, you can renew your mortgage with your existing lender, or switch lenders to get a more desirable mortgage product. Since you will already have had to qualify for your 2-year fixed-rate mortgage at the same standards you would have needed to qualify for a 5-year fixed-rate mortgage, provided you renew with your existing lender, you can do so without re-qualifying (as long as you’ve been making your mortgage payments regularly and are in good standing with your lender). Should you choose to switch to another lender and seek a 5-year fixed-rate mortgage with them, you will need to submit an entirely new mortgage application.
If you feel like you need to convert your mortgage from a 2-year term to a 5-year term before the initial 2-year term is done, you risk breaking your mortgage and incurring substantial penalties. Unless you absolutely need to, it’s generally not advisable to take this step. However, if you must do so, you may be able to negotiate an agreement with your current lender, depending on the terms of your original mortgage contract.
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Jamie David, Sr. Director of Marketing and Mortgages
A 2-year fixed mortgage will have a constant rate of interest over a term of two 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.
2-year terms are not popular in Canada, representing a tiny portion of all mortgages. However, they can be a very useful mortgage rate type if you're looking for a little more flexibility. In the wake of multiple interest rate hikes by the Bank of Canada over the course of 2022 and into early 2023, short-term fixed rates have become more appealing to consumers than they typically are.
2-year fixed mortgage rates: Quick facts
- Mortgage rate is fixed over a 2-year term
- A total of 3.02% of all mortgage requests made on Ratehub.ca from January - December 2023 were for 2-year fixed mortgages, compared to 2% for the whole of 2022.
- Nearly 13% of all mortgage requests made on Ratehub.ca in 2023 were for short-term fixed mortgages with terms of 4 years or less, compared to just under 6% for the whole of 2022.
- 2-year fixed mortgage rates follow 2-year government bond yields
Why choose a 2-year fixed-rate mortgage
While 2-year fixed-rate mortgages represent a relatively tiny percentage of fixed-rate mortgages in Canada, they have been growing in popularity over the past year or so. This is in large part because many homeowners and home buyers have grown increasingly wary of variable mortgage rates in light of the historic eight successive rate hikes carried out by the Bank of Canada between March 2, 2022 and January 25, 2023. Moreover, we are currently in a situation where the best 2-year fixed mortgage rates are actually lower than variable rates, though this is fairly unusual.
It’s important to think about not just today’s rate environment, but also your own personal circumstances when considering a 2-year fixed-rate mortgage. Do you plan on moving soon? Do you expect to change jobs? What else do you have on your horizon that might affect what mortgage product is best for you?
If you are looking for short-term stability with enhanced flexibility, then a 2-year fixed-rate mortgage could be a great option. If you believe that rates are likely to come down in the next year or two, as many financial experts do, and you’re willing to take a risk based on your belief, again a 2-year fixed-rate mortgage just might be right for you. If you’re feeling unsure about whether this is the right choice, you can always speak to a mortgage broker, who can provide you with expert, personalized advice at no cost.
2-year fixed mortgage rates vs. other term lengths (interactive graph)
Historical 2-year fixed mortgage rates
It’s always a good idea to have a look at how the rates for different mortgage terms have changed over the years, as it can give you an understanding of what terms generally attract the best rates. You’ll see in the chart below that 2-year fixed mortgage rates have not always been cheaper than variable rates, the way they are today; in fact, for much of the last four years, they were substantially more expensive. That said, in today’s elevated rate environment, 2-year fixed mortgage rates are quite competitive (see the rate table above for the best rates on the market).
In the chart below, you can compare 2-year fixed mortgage rates against the rates for other types and terms to see how they have changed over the last few years.
Jamie David, Director of Marketing and Head of Mortgages
Jamie has 15+ years of business and marketing experience. She contributes her mortgage expertise to The Globe and Mail and authors Ratehub’s mortgage and homebuying guides. read full bio