Best 4-year fixed mortgage rates
What are 4-year fixed mortgage rates?
The '4' in a 4-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 4-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 4-year fixed mortgage rate is 3%, then you will pay 3% interest throughout the term of the mortgage.
It's worth noting that all borrowers, even those applying for a 4-year term, will need to meet the standards of approval for the 5-year mortgage rate. This is a standardized benchmark applied to reduce risk for the lender and to give the borrower some breathing room.
How much can I save comparing 4-year fixed rates?
Your mortgage is likely to be among the largest financial commitments you’ll ever make, and getting a better rate can save you thousands, even over just a 4-year term. Even a slightly lower mortgage rate can result in big savings, especially early on in your mortgage.
For example, on a $500,000 mortgage with a 25-year amortization period, a rate of 3.00% would see you pay $56,355 interest over 3 years. With a 2.75% rate, you’d pay $51,591 interest over the term. So, a difference of just 0.25% can save you $4,764 over your 3-year term.
Why compare 4-year fixed rates with Ratehub.ca?
We make it simple to see current mortgage rates from all of Canada’s leading mortgage providers in one place. We have rates from the big banks, credit unions as well as smaller lenders across the country. This makes it easy to see who offers the best rates in Canada in real time, at no cost to you.
Why are fixed rates different from variable rates?
You can think of the difference, or spread, between variable mortgage rates and fixed rates as the price of insurance that mortgage costs will not increase in the next five years, more or less. The advantage of fixed-rate mortgages is that you know exactly how much your mortgage payments will be regardless of whether rates rise or fall. You can, essentially, set it and forget it. This eases the budgeting anxiety that may follow a variable-rate mortgage.
When interest rates are low, and the spread between shorter-term rates and the 5-year fixed mortgage rates is less significant, it is typically recommended that you lock in the 5-year rate. The longer term offers stability and, because rates are historically low, the chances of rates decreasing further with a variable rate are greatly reduced.
On the other hand, as is the case with all fixed mortgage rates, there is the potential to pay higher interest when variable rates are low, and, examined historically, variable rates have proven to be less expensive over time.
Are 4-year mortgages better than other mortgage terms?
Four-year mortgage terms aren’t necessarily better than other terms. You should pick a term length based on your financial needs and current situation, as well as what rates are on offer. 5-year terms are the most popular in Canada, as they offer a compromise between stability and flexibility. However, if flexibility is important to you, a 4-year term could be worth considering.
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Jamie David, Sr. Director of Marketing and Mortgages
Whether you're looking to take on a new mortgage or renew your current one, it's important to get familiar with all of the products available to you, even the slightly more niche ones.
4-year mortgages aren't very common in Canada, with most mortgages being 5-year terms. However, 4-year mortgage terms can make sense under certain circumstances. Here's what you need to know in order to decide if they're right for you.
What is a 4-year fixed mortgage?
A 4-year fixed mortgage will have a constant interest rate over a 4-year term. 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.
4-year fixed mortgage rates: Quick facts
- Mortgage rate is fixed over a 4-year term.
- Only 0.26% of all mortgage requests made on Ratehub.ca from January to September 2023 were for 4-year fixed mortgages. However, this was still more than double the 0.1% registered in all of 2022.
- Some 13.3% of all mortgage requests made on Ratehub.ca from January to September 2023 were for short-term fixed mortgages with terms of 4 years or less, compared to just under 6% for the whole of 2022.
- 4-year fixed mortgage rates follow 4-year government bond yields.
Comparing 4-year fixed mortgage rates
There are a number of factors supporting the choice of a short-term rate like the 4-year fixed mortgage rate. Generally, if you believe you're in a falling interest rate environment, where rates will stay stagnant or fall, shorter terms are more beneficial. This is because your renewal date will be sooner, letting you take advantage of low rates when your mortgage is up for renewal. Short terms are also sensible if you're likely to break your mortgage within a few years – if you want to upgrade your home, for example.
Of course, with 4-year terms being so close to the typical 5-year term, the benefits of a shorter-term aren't as pronounced as they are with a 3-year or shorter term. Most people would consider 4-year terms to be a balanced term length, but offering a little more flexibility than a 5-year term.
4-year fixed vs. longer-term mortgage rates
4-year fixed rates are typically a little lower than rates on longer terms (like 5 or 10 years), but higher than short term rates, like 1-year rates. This is because longer fixed-rate terms can 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 both the current market and your present circumstances.
4-year rates compared to other term lengths (interactive graph)
Historical 4-year fixed mortgage rates
Looking at historical mortgage rates is a good way to understand which mortgage terms generally attract the lowest rates. Historical rates also help you understand whether rates are currently higher or lower than they have been in the past.
Here are the lowest 4-year fixed rates of the year in Canada for the last several years, compared to several other mortgage terms.
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