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5-year fixed mortgage rates in Canada

Ratehub.ca Insights: Some lenders reduced their high-ratio fixed-rate options over the weekend as bond yields have dipped back down to the 3.5% range. Getting a pre-approval is recommended when shopping to lock in a rate for up to 120 days. Variable mortgage rates are unchanged.

As of:

RateProviderPayment

Canadian Lender

$2,263

Big 6 Bank

$2,274

Alterna Savings

$2,296

Desjardins

$2,308

Canwise

A Ratehub Company

$2,308

Meridian Credit Union

$2,310

WATCH: January 24, 2024 Bank of Canada announcement

5-year fixed rates: Frequently asked questions

Why did fixed rates go up so much in 2022 and 2023?


Will fixed mortgage rates go down in 2024?


I’m in a variable-rate mortgage. Should I lock-in a fixed-rate?


Is a 5-year fixed-rate mortgage a good idea right now?


Is it better to choose a 2-year or a 5-year fixed-rate mortgage?


What impact do changing fixed rates have on the stress test?


What is Canadian Lender and Big 6 Bank?


5-year fixed rates vs. 5-year variable rates

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February 2024: Mortgage market update 

The past few months have been very volatile in the Canadian real estate market, and the start of the year has been no exception thus far. Bond yields are once more on the rise after a brief interlude that saw fixed rates fall below 5%, while variable mortgage rates remain high after the Bank of Canada’s historic rate-hiking cycle from March 2022 to July 2023 that brought the Overnight Lending Rate to 5%. Here’s what today’s mortgage shopper in Canada should know:

  • Real estate update: On February 14, 2024, the Canadian Real Estate Association (CREA) published the most recent figures for the Canadian housing market for the month of January. The latest data indicates that the market seems to be coming back to life after a rather slow second half of 2023. Some 25,540 residential properties changed hands across Canada in the month of January, up by a notable 22% year-over-year, and by 3.7% on a monthly basis. New listings rose in January, but not enough to offset increased demand. The average national home price in Canada rose by 7.6% on an annual basis to $659,395. A robust rebound in demand has pushed market conditions towards the “seller-friendly” side of what is considered a balanced market. The sales-to-new-listings ratio (SNLR), which CREA uses to gauge competition in a given housing market, came in at 58.8% in January. According to CREA, which uses the SNLR to gauge competition in the marketplace, a ratio between 40-60% indicates balanced market conditions, with above and below that threshold representing sellers’ and buyers’ markets, respectively.

    Read more: Canadian realtors hopeful sales growth will continue

  • CPI update: In what is surely welcome news to consumers, according to Statistics Canada, the most recent Consumer Price Index (CPI) figures for the month of January 2024 came in at just 2.9%, well below the 3.3% most economists had expected. Moreover, this is the first time since March 2021 that inflation rose lower than 3%. The largest contributor to this lower inflation number was weakening gas prices, which rose by 3.2% in January compared to 3.5% the month before; this marks the fifth consecutive month where gas prices have softened. Food costs also diminished significantly, coming in at just 3.4%, down from 4.7% in December. This latest CPI reading falls within the Bank of Canada’s 1 - 3% target range, and we can reasonably assume that this means the central bank will hold rates steady in the near term. Should inflation continue to decline, market observers are predicting rate cuts as early as the second quarter of 2024.

Read more: Inflation falls to 2.9% in January

 

2024 Housing market forecast

In response to increasing expectations of rate cuts in 2024 and pent-up home buyer demand, CREA revised its forecast for 2024 and 2025 upwards. 

If CREA’s predictions hold true, some 489,661 homes will change hands in 2024, an annual increase of 10.4%. Growth is projected to be most robust in those provinces where demand has been consistently strong, with Alberta as a prime example. That said, even markets that have experienced historically low sales volume in the last couple of years are set to experience growth. The average home price in Canada is expected to rise by 2.3% to $694,173 in 2024, with Alberta, Quebec, New Brunswick, Nova Scotia and Newfoundland and Labrador seeing the largest increases. Home prices in British Columbia and Ontario, though, are expected to remain relatively flat. 

Housing market activity is expected to continue to increase in 2025, with sales forecast to reach 525,498 homes, representing an increase of 7.1%. The average home price in Canada is projected to come in at $722,063, up by 4%.


5-year fixed mortgage rates are the most popular type and term combination in Canada, so it’s usually the first place people start when researching mortgage rates. Ratehub.ca makes it easy to find the lowest 5-year fixed mortgage rates, as we bring rates from the big banks, lenders and credit unions all to one place at no cost to you.

January 24, 2024 Bank of Canada announcement update

On January 24, 2024, the Bank of Canada held its target for the overnight rate steady at 5.00%.

  • Multiple data points justified a rate hold, including relatively weak economic growth, slackening consumer spending and a reduction in business investment. 
  • Although the Bank noted that inflation is continuing to slow, it also pointed out that December’s CPI of 3.4% was both well above its 2% target and higher than expected; as a result, higher rates need to be maintained for longer in order to tamp inflation down to 2%. 
  • Holders of variable-rate mortgages and home equity lines of credit (HELOC) will be happy to see their rate remain stable, but will certainly be looking for signs of rate cuts to come. 
  • Fixed mortgage rates are tied to the bond market rather to the Bank of Canada’s rate decisions, but with bond yields having spiked in response to December’s CPI number, many lenders were waiting to see what insights the Bank might provide. With little in the way of new information from the Bank, lenders may well think about raising their fixed mortgage rates. 
  • Anyone looking to buy a home or whose mortgage is up for renewal should secure a rate hold now to protect themselves from any unexpected rate increases. 
  • It’s unlikely that this announcement will have much of an effect on home prices, as it is basically more of the “wait and see” messaging that the Bank has been providing of late. If the Bank had made any mention of rate cuts, home values would have begun increasing almost immediately.


Best 5-year fixed mortgage rates

5-year fixed mortgage rates: Quick facts

80%

Four out of five of all mortgage requests made on Ratehub.ca from January - December 2023 were for 5-year fixed-rate mortgages

69%

69% of Canadian mortgage-holders had fixed-rate mortgages as of the end of 2022 (Source: Mortgage Professionals Canada)

  • Mortgage rate is fixed over a 5-year term
  • 5-year mortgage rates are driven by 5-year government bond yields

What makes a 5-year fixed-rate mortgage right for me?

Generally, a fixed-rate mortgage is a good choice if you are risk-averse and don’t want to deal with the stress that could come with a variable rate if the prime rate goes up over time and your mortgage payment increases. Before committing to a 5-year mortgage, you need to think about your personal situation today and going forward. If you are likely to move, change jobs, or otherwise embark on any life changes that may affect your ability or desire to remain in the home you are purchasing, you need to take this into account when selecting the mortgage that’s right for you.

Full feature mortgages vs. restricted mortgages

While it’s always desirable to obtain the best mortgage rate, in today’s historically high rate environment, the quest to find the lowest rate seems more important than ever. It also means that one needs to be vigilant about choosing the right mortgage for your needs. The lowest rate that you see advertised may not be what you want, because it could well be for a restricted mortgage. Although the low rates of a restricted mortgage may catch your eye, it’s important to understand the drawbacks. A full feature mortgage will have a higher interest rate, but it will also have a number of features that make it very desirable, including:

  • Pre-payment options: Take a look at what pre-payment options your lender is willing to offer you. The more flexible your lender is with pre-payment options, the faster you can potentially pay off your loan, which could save you thousands of dollars in interest fees. The main pre-payment options are monthly pre-payment and lump sum pre-payment. In the case of the former, you’re allowed to increase your monthly payment up to a certain percentage determined by your lender, maxing out at 100%. If you had a lender who was flexible enough to allow you to double your monthly payments, for example, you could in theory pay your mortgage off in half the time if you were able to do so. The latter option, lump sum pre-payment, allows you to pay off up to say, 25% of your mortgage loan, again, depending on your lender.
  • Porting your mortgage: If you need to sell your home before the end of your mortgage term, many lenders will allow you to port your mortgage. Porting a mortgage means to take your current mortgage with its existing rates and terms and transfer it to another property, and allows you to avoid breaking your mortgage. You’ll want to talk to your lender about how portable your mortgage is, particularly if you think you may need to move before your term is up. Not all mortgages are portable, and many that are portable have conditions attached that you should be aware of.
  • Lump sum pre-payment privileges: You are allowed to make multiple lump sum pre-payments to bring down your mortgage balance in a given calendar year. Most lenders will cap the amount of pre-payments you can make, e.g. you cannot pay more than 20% of your principal in a single year.
  • Payment flexibility: If you choose to increase the size of your regular mortgage payments, you are able to do so without incurring any penalties or fees.

These are just some of the most common features you’ll find in a full feature mortgage that make them so convenient for homebuyers. To learn more about the mortgage that’s right for you, it’s always a good idea to speak with a mortgage broker. They can give you personalized, expert advice at no cost to you.

What are some of the pros and cons of a 5-year fixed mortgage?

There are pros and cons to choosing a 5-year fixed mortgage rate, and we’ll walk you through each below. Some of the pros of a 5-year fixed mortgage are: 

  • Risk protection: For buyers who are risk-averse; a fixed rate mortgage enables you to “set it and forget it” - your rate, and therefore mortgage payment, is locked in and will not fluctuate with changes in bond yields. This allows you to budget with greater accuracy and offers you stability for the duration of your term. Moreover, in recent years, Canadians enjoyed access to some of the best fixed rates available in decades, although fixed rates started to climb again in October of 2021. Since then, high inflation, global banking instability, an incredibly tight job market and other factors have all pushed bond yields up, and with them, fixed mortgage rates. Today’s fixed rates are now higher than they have been since back in 2009.
  • Competitive rates: The 5-year term is historically the most popular option, and the one that lenders often encourage you to opt for. The length of this term is a good “middle of the road” choice for home buyers. Because it’s such a competitive, popular rate term, lenders often get the most aggressive when pricing these terms.

On the flip side, there are some cons to consider as well. 

  • Higher rates: In order to guarantee your fixed rate, your lender will charge you a premium. According to York University Professor Moshe Milevsky’s landmark 2001 study, historically, over 90% of Canadians who have maintained a variable mortgage rate throughout their entire mortgage term have paid less in interest than those who have stuck to a fixed rate.
  • Breakage penalties: While the 5-year term can offer you peace of mind, in the event that something such as a move, loss of a job, illness or divorce forces you to break your mortgage, you could be on the hook for a hefty break penalty. With a fixed mortgage rate, your penalty will be the greater of the interest rate differential (IRD) or three months’ interest. Oftentimes, the IRD penalty can be large, and thus a fixed rate mortgage can be expensive to break. If you have a variable rate mortgage, on the other hand, the penalty will always be three months’ interest, and it can therefore be less costly to break your mortgage. For a more detailed explanation of IRD and how it is calculated, you can refer to our Mortgage Refinance Calculator page. You can also use our Mortgage Penalty Calculator to estimate how much you might have to pay in the event that you have to break your mortgage. 
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Historical 5-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.

Here are the lowest (high-ratio, insured) 5-year fixed rates of the year in Canada for the last several years, compared to several other types of mortgage rates.

Source: Ratehub Historical Rate Chart

 

The popularity of 5-year fixed mortgage rates

A 5-year mortgage term is the most popular duration. It sits right in the middle of available mortgage term lengths, between one and 10 years, and, thus, its popularity reflects a risk-neutral average. It also tends to be heavily promoted by major lenders. A further breakdown of mortgage terms shows that about 80% of mortgages have terms of five years or less.

Fixed rates are by far the most common - in 2023, from January to September, almost 95% of mortgage rate inquiries made to Ratehub.ca were for fixed rates

What drives changes in 5-year fixed mortgage rates?

By and large, 5-year fixed mortgage rates follow the pattern of 5-year Canada Bond Yields, plus a spread. Bond yields are driven by economic factors such as unemployment, export and inflation.

When Canada Bond Yields rise, sourcing capital to fund mortgages becomes more costly for mortgage lenders and their profit is reduced unless they raise mortgage rates. The reverse is true when market conditions are good.

In terms of the spread between the mortgage rates and the bond yields, mortgage lenders set this based on their desired market share, competition, marketing strategy and general credit market conditions.

Ratehub.ca education centre

  • Buying

    So you've made the decision to buy a new home! The first step is to figure out how much you can afford to spend.

    read more
  • Renewing

    If your current mortgage is up within four months, now's the time when most lenders will allow you to start the early mortgage renewal process.

    read more
  • Refinancing

    When deciding whether or not you should refinance your current mortgage and replace it with a new one, there are a few important things to consider.

    read more