Best 3-year fixed mortgage rates
What are 3-year fixed mortgage rates?
The '3' in a 3-year mortgage rate represents the term of the mortgage, not to be confused with the amortization period. The term is the period you are committed to the contractual provisions and mortgage rate with your lender, while the amortization period is the amount of time it will take you to pay off your mortgage in full. 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 3-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 3-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 3-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.
What is better, a 3-year or a 5-year fixed mortgage rate?
In general, 3-year fixed mortgage rates are higher than 5-year fixed mortgage rates. This is in part due to the fact that 3-year fixed-rate mortgages are not nearly as popular of an option for most Canadians, so there aren’t as many 3-year fixed-rate mortgage products available.
It’s important to keep in mind, however, that the lowest mortgage rate is not always the best mortgage rate for your particular situation. When choosing the mortgage term that’s best for you, you’ll want to consider a number of factors, including your financial situation, any upcoming life plans such as a potential move, as well as the housing market and rate environment.
If, for example, you believe that rates may be lower in 3 years than where they are today, but want to safeguard yourself from the risk of rate hikes in the near future, then a 3-year fixed-rate mortgage would make more sense in your situation. If you’re unsure as to what term best fits your needs, you can always consult with a mortgage broker to get expert, personalized advice at no cost.
What bank offers the best 3-year fixed mortgage rate?
As of December 22, 2023, the Big Bank offering the best 3-year fixed mortgage rate is Scotiabank, with a rate of 5.64%.
While this is the lowest Big Bank 3-year fixed mortgage rate, it is not the lowest such rate on the market. To find the best 3-year fixed mortgage rate, be sure to shop around using our rate table above. It lists rates from multiple providers and is updated automatically throughout the day to ensure you’re always seeing the best 3-year fixed mortgage rates currently on offer.
Can you get a 3-year mortgage term?
You can certainly get 3-year mortgage terms in Canada, with both 3-year fixed-rate and variable-rate products on the market. While 3-year fixed-rate mortgages are historically not a very popular choice in Canada, in the wake of ten rate hikes by the Bank of Canada between March 2022 and July 2023, there has been a noticeable increase in demand for them.
3-year fixed-rate mortgage products are available at competitive rates from a wide range of lenders, including the Big Banks, credit unions and smaller, local banks. For a comprehensive list of the most current 3-year fixed-rate mortgage products on offer, be sure to check out our rate table above and shop around.
Compare current mortgage rates across the Big 5 Banks and top Canadian lenders. Take 2 minutes to answer a few questions and discover the lowest rates available to you.
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Jamie David, Sr. Director of Marketing and Mortgages
While 3-year mortgage terms are historically not very common in Canada, as a result of the rapidly rising rate environment that we saw throughout 2022 and into 2023, 3-year fixed-rate mortgages have seen a surge in interest. Spooked by high rates and market volatility, many home buyers and homeowners are wondering whether they might not be better off with a 3-year fixed-rate mortgage to help them ride out these uncertain times. Here's what you need to know to help decide whether a 3-year mortgage is right for you.
3-year fixed mortgage rates: Quick facts
- Mortgage rate is fixed over a 3-year term
- At total of 8.4% of all mortgage requests made on Ratehub.ca from January to December 2023 were for 3-year fixed-rate mortgages, compared to only 2.8% for the whole of 2022
- Just under 13% of all mortgage requests made on Ratehub.ca from January to December 2023 were for short-term fixed-rate mortgages with terms of 4 years or less, compared to just under 6% for the whole of 2022
- 3-year fixed mortgage rates closely follow 3-year government bond yields
Choosing a 3-year fixed-rate mortgage
A 3-year fixed-rate mortgage falls into the category of short-term mortgages, generally defined as mortgages with a term of less than 5 years. Such mortgages only account for a small fraction of all mortgages in Canada, but interest has grown considerably over the past several months.
Over the course of 2022 and into early 2023, in response to soaring inflation, the Bank of Canada raised the target for the overnight rate by 4.25%, from 0.25% at the beginning of 2022 to 4.50% today. This sent variable mortgage rates soaring, while fixed mortgage rates climbed as well due to inflation causing bond yields to rise rapidly. Faced with a high rate environment and instability brought about by factors such as bank failures in the United States and abroad, many homeowners and home buyers want the security of a fixed rate without being locked in for too long. Given that experts believe mortgage rates are likely to have peaked and will go down in 2024 and 2025, selecting a 3-year fixed-rate mortgage is a reasonable choice if you want to protect yourself until the situation stabilizes and rates are lower.
Of course, you must also take into account your own personal circumstances when deciding on a mortgage term. Think about what life events you may have on the horizon, such as a move or a job change. Do you need a little flexibility combined with a little stability? If so, a 3-year fixed-rate mortgage just might be right for you.
3-year fixed vs. longer-term mortgage rates
3-year fixed rates are typically slightly lower than rates on longer terms (like 5 or 10 years) and higher than rates on short terms, like 1-year rates. 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.
3-year mortgage rates vs. other term lengths (interactive graph)
Historical 3-year fixed mortgage rates
By examining mortgage rates over time, you’ll get a good sense of which mortgage terms attract lower rates. A historical perspective also makes it easier to understand whether rates –- in this case, 3-year fixed mortgage rates –- are currently higher or lower than they have been in the past.
Here are the lowest 3-year fixed rates in Canada of the year for the last several years, compared to several other types of mortgage rates.
Source: Ratehub Historical Rate Chart
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.
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