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5-year fixed mortgage rates in Canada

Ratehub.ca Insights: Bond yields have fallen further in the wake of the Bank of Canada's quarter-point rate cut on Wednesday, and some lenders have reduced their fixed rates. Downward pressure remains on fixed mortgage rates. Getting a pre-approval is recommended when shopping to lock in a rate for up to 120 days. Variable mortgage rates are stable.

Transaction type

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Purchase price

Down payment $

Rate term

Amortization

Occupancy

Payment frequency

Rate	Provider	Payment
	Canadian Lender	^$2,174
	Meridian Credit Union	^$2,229
	Canwise A Ratehub Company	^$2,229
	Big 6 Bank	^$2,240
	Desjardins	^$2,240
	CMLS Financial	^$2,251
	CIBC	^$2,263
	TD Bank	^$2,263
	First National	^$2,274
	Alterna Savings	^$2,274
	Bank of Montreal	^$2,290
	MCAP	^$2,296
	Scotiabank	^$2,319
	Equitable Bank	^$2,319
	ICICI Bank Canada	^$2,526
	motusbank	^$2,693
	RBC Royal Bank	^$2,263
	Simplii Financial ™	^$2,263
	Tangerine	^$2,353
	National Bank	^$2,717

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WATCH: July 24, 2024 Bank of Canada announcement

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5-year fixed rates: Frequently asked questions

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

Following some of the lowest interest rates in history during the pandemic, Canada’s cost of borrowing sharply increased in 2022 and 2023, as the central bank had to take extraordinary measures to calm rampant inflation growth. The Bank of Canada did so with a 10-part series of rate hikes – the steepest in Canadian history – which increased its benchmark Overnight Lending Rate from a pandemic low of 0.25% in early 2022, to 5% today. Seven of these rate increases occurred between March and December 2022, with the following three implemented between January and July 2023. As a result, Canada’s prime rate now sits at 7.2%, which has directly influenced lenders to increase their variable mortgage rates; five-year variable rates rose by roughly 65 basis points over the course of 2023, from 5.3% in January, to 5.95% by December.

Fixed mortgage rates also rose during this time period due to negative investor reaction in Canada’s bond market, as yields hit a 16-year high in October; the lowest five-year fixed mortgage rate started 2023 at a low of 4.39%, and rose to 5.24% by the end of the year.

Will fixed mortgage rates continue to go down in 2024?

After weathering two years of mortgage rate increases, it appears borrowers are in store for lower mortgage rates in 2024 - as long as economic conditions play out as expected.

The Bank of Canada, which has a mandate to keep inflation within a 2% target and has done so via a 10-part series of rate hikes over 2022 and 2023, finally deemed that inflation had fallen sufficiently and steadily enough to proceed with -0.25% rate cuts at its last two announcements on June 5 and July 24. Most expert observers are predicting another rate cut at the Bank’s next announcement on September 4, barring a major surprise.

In the Bank’s most recent rate announcement on July 24, 2024, it noted that June’s CPI of 2.7% was in line with expectations, while inflation was declining steadily in Canada, the United States and elsewhere. In the days leading up to the Bank’s July 24 announcement, bond yields had begun dropping as anticipation of a rate cut grew, and a few lenders discounted their fixed mortgage rates. In the wake of this announcement, more lenders have already lowered their fixed mortgage rates, and others are sure to follow. Should the Bank decide to implement another rate cut in September, we can expect a similar trajectory of events. As such, it is reasonable to expect that fixed mortgage rates will be trending downward for the foreseeable future, barring an unexpected turn of events.

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

Since you can’t go back in time and get the fixed rate you were offered at the beginning of your mortgage, the decision becomes more complicated. That’s because fixed mortgage rates are currently priced within the expectation of where variable mortgage rates will trend throughout your term.

You may be thinking about locking into a fixed rate because the prime rate increased throughout 2022 and in 2023 and your variable rate has moved substantially higher than where it was when you first signed your mortgage contract. However, it’s important to note that fixed rates increased significantly as well during this time period. Therefore, you have to make the variable vs. fixed decision in the current rate environment and your decision should come down to your appetite for risk and your household finances.

In its last announcement on July 24, the Bank of Canada cut the Overnight Lending Rate by -0.25% for the second time in a row, taking it to 4.5%. The Bank’s commentary indicated that declining inflation both in Canada and in the United States and elsewhere in the world was the main driving factor behind its decision to implement a second rate cut. Should inflation continue to trend downwards, most market observers are predicting another rate cut at the Bank’s next announcement on September 4.

Before switching your mortgage, the main thing to consider is the spread between your current variable rate and the best fixed or variable rate you can get today.

Read: Should you switch from a variable-rate to a fixed-rate mortgage?

Read: Think mortgage rates will drop? The argument for getting a variable rate now

If the spread between your current rate and the best rate you can get today is greater than the amount by which you believe the prime rate will increase for the rest of your mortgage term, then you may end up saving more by keeping your current variable rate.

If the discount to prime of the best variable rate you can get today is bigger than your current variable rate, then switching to a new variable rate may afford you more savings and provide a greater cushion against further rate increases.

If you believe that you can save more money by breaking your current variable rate, make sure to account for the cost of breaking your mortgage. You can use Ratehub’s penalty calculator to help you estimate this cost.

Lastly, if your biggest concern is the change to your monthly mortgage payments, there are some lenders who offer variable rates with “fixed” mortgage payments that do not change during the term. In such cases, when prime goes up, your monthly payment remains the same but the percentage of your payment that goes towards your principal decreases. This means that more of your payment goes towards paying the increased interest and ultimately it may take you longer to pay back your mortgage amount in full. However, it should be noted that you can hit your trigger rate (the point at which your monthly payments are going entirely to interest and not principal), and then your trigger point. The trigger point varies from one lender to another and is spelled out in your mortgage contract. A common trigger point is when the balance you owe on your mortgage exceeds the amount you initially borrowed. Once you hit your trigger point, even if your payments are 'fixed', you will have to increase your monthly mortgage payment. Most estimates show that the great majority of Canadians with variable-rate mortgages on a fixed payment schedule have hit their trigger rates in the wake of the 10 rate hikes effected by the Bank of Canada since March 2022.

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

Fixed mortgage rates have historically been the most popular rate type in Canada, because they offer borrowers peace of mind; unlike a variable mortgage rate, which will fluctuate whenever the Bank of Canada changes its target Overnight Lending Rate, fixed mortgage rates are guaranteed for the mortgage’s entire term. This can help borrowers avoid volatility in the market, especially if rates rise unexpectedly. In fact, inquiries for five-year fixed mortgages made up 79% of all rate requests received by Ratehub.ca in 2023, compared to just 5% for five-year variable rates.

However, the trade off for fixed mortgage rates is less flexibility; because borrowers are locked in for their whole term, they can’t take advantage of lower mortgage rates, should they become available. Their only options in this scenario are to either wait out their term in the hopes lower rates will still be available at mortgage renewal time, or to break their mortgage and refinance at a lower rate. The latter option comes with considerable penalties that could offset the financial benefit of taking out a new, lower rate.

Borrowers should keep in mind that while fixed mortgage rates trended lower in the latter part of 2023, the market remains quite volatile – factors such geopolitical tensions, unexpected inflation growth or hawkish messaging from the Bank of Canada all have the ability to cause spiking bond yields, which in turn would drive fixed rates higher. In short, borrowers making the decision between a fixed or a variable mortgage rate should work closely with a mortgage professional such as a mortgage broker, to assess their personal financial situations and risk tolerance.

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

The length of your mortgage term is an important consideration; while a longer five-year fixed mortgage term provides greater protection from interest-rate volatility during that time period, the borrower is unable to change their mind about their rate, or take advantage of suddenly lower mortgage rates, until their term comes up for renewal. A shorter two-year fixed mortgage term offers this protection for a shorter time period, with the flexibility to make a new decision about the mortgage three years sooner than a five-year term.

However, shorter-term mortgage rates are higher than five-year options, and there is no guarantee that interest rates won’t rise during the shorter time frame, meaning borrowers will be exposed to them at renewal time. Due to this, it’s important to assess your personal financial strategy and risk tolerance when selecting the length of term for your mortgage.

Also read: Is a short-term fixed-rate mortgage right for you?

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

As fixed mortgage rates remain elevated compared to the historical lows seen during the pandemic, the mortgage stress test threshold continues to pose a tough hurdle for many borrowers.

Mortgages are currently stress tested based on the higher of:

the qualifying rate (currently 5.25%), or
your contract rate + 2%

As of July 25, 2024, the lowest available high ratio 5-year fixed rates are at 4.54%, while the lowest variable rate available is 5.45%. Therefore, whether you have a fixed-rate or variable-rate mortgage, the stress test used is the contract rate + 2% (as that will always be higher than 5.25%).

What is Canadian Lender and Big 6 Bank?

On our rate comparison tables, Ratehub.ca features generic brands like “Canadian Lender”. The “Canadian Lender” rate represents the lowest rate our brokerage can offer among the different lenders we work with. This means that this rate can be from a Big Bank, trust company, or lending company. The reason we do not advertise the rate under the name of the actual lender offering it, is because the rate is only available through our brokerage, via a special volume discount or promotion.

Similarly, “Big 6 Bank” is another generic provider that is used to advertise the lowest Big Bank rate that the Ratehub.ca brokerage can offer.

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

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Guide to 5-year fixed mortgage rates

Jamie David, Sr. Director of Marketing and Mortgages

July 24, 2024

July 24, 2024 Bank of Canada announcement update

On July 24, 2024, the Bank of Canada reduced its target for the overnight rate by -0.25%, taking it from 4.75% to 4.5%. This marks the second time in a row that the Bank of Canada has carried out a rate cut, after not implementing one since March 2020.

The Bank of Canada pointed to falling inflation as the justification for the rate cut. June’s inflation reading came in aligned with expectations at 2.7%, while inflation in the United States and around the world is declining as well.
Fixed mortgage rates are tied to the bond market rather than to the Bank of Canada’s rate decisions, but anticipation of a possible rate cut had caused some lenders to lower their fixed mortgage rates in the days leading up to the announcement. With this rate cut now on the books, more lenders will surely begin discounting their fixed-rate offerings.
Canadians with variable-rate mortgages and home equity lines of credit (HELOC) will undoubtedly be thrilled that their rates are going to continue coming down after having reached a nearly 20-year high.
Although this is only a quarter-point rate cut, it remains to be seen how much of an effect this will have on the housing market. We already saw a slight bump in activity as a result of the quarter-point cut implemented by the Bank in June, so it is very possible that another such cut will entice home buyers back into the market.

July 2024: Mortgage market update

The spring season was relatively slow for the Canadian housing market, as buyers were reluctant to step off the sidelines until rates dropped. With the Bank of Canada having carried out the first policy rate cut in over four years on June 5, 2024, and more rate cuts anticipated, there could well be a rebound in home sales in the near future.

In the wake of June’s rate cut, variable mortgage rates declined almost immediately. With another rate cut widely expected in July, there is additional downward pressure on rates.

Bond yields have tumbled to the 3.3% range in response to the Bank’s June rate cut and a number of other economic indicators from Canada and abroad, causing some lenders to reduce their fixed mortgage rates.

That said, when looked at historically, fixed and variable mortgage rates are both elevated at the moment. If you’re looking for a mortgage rate in Canada right now, these are some important economic factors to know.

Real estate update: On July 12, 2024, the Canadian Real Estate Association (CREA) published the most recent figures for the Canadian housing market for the month of June 2024. The latest data indicates that Canada’s housing market experienced a modest month-over-month increase in sales between May and June, likely as a result of the Bank of Canada’s June rate cut. As a result, the 45,654 home sales across Canada in June represented a 3.7% monthly improvement, but were still down by -9.4% from the same time last year. On the other hand, sellers continue to enter the market in droves, and as a result, new listings are up by 26% year over year. The influx of new listings has ensured that price growth has remained fairly flat. In fact, the national average home price actually dipped by -1.6% on an annual basis, coming in at $696,179. One benefit of the current situation is that buyers are enjoying balanced market conditions, with June’s national sales-to-new-listings ratio (SNLR) standing at 53.9%. CREA considers a range from 45 - 65% to be balanced, with above and below that threshold representing buyers’ and sellers’ markets, respectively.

Read more: Rate cut leads to small June jump for national home sales
CPI update: On July 16, 2024, Statistics Canada released the latest June Consumer Price Index (CPI) report. The most recent data reveals that the headline inflation number in June stood at 2.7%, which was what markets had been expecting. This figure is lower than the 2.9% reported for May, and indicates promising progress in the Bank of Canada’s struggle to tamp inflation down to its 2% goal. A major contributor to June’s lower figure were dropping gas prices, which rose a mere 0.4% in June, as compared to 5.6% in May. Durable goods, meanwhile, saw a price drop of -1.8%, which in turn lowered the price of the all-items CPI. That said, grocery prices rose for the second consecutive month, up by 2.1% in June compared to 1.5% in May. Meanwhile, shelter inflation (including mortgage interest costs and rent costs), which has been the largest contributor to CPI for some time now, dropped to 6.2% in June from 6.4% in May. The Bank of Canada’s June 5th rate cut made itself evident, with mortgage interest costs declining to 22.3% in June compared to 23.3% the previous months. Rent costs, though, hardly budged, falling just -0.1% from May and standing at an elevated 8.8% in June. Other core inflation measures closely monitored by the Bank, namely the CPI Trim and CPI median, rose at a slower pace than previously, coming in at 2.6% and 2.9%, respectively.

2024 Housing market forecast

CREA has released an updated housing market forecast for the latter half of 2024 and 2025, taking into account the likelihood of fewer rate cuts from the Bank of Canada than expected, a larger than expected increase in housing supply and continued reticence on the part of buyers.

CREA’s revised forecast sees a total of 472,395 homes being sold in 2024, up by 6.1% from the previous year. This is, however, down from their previous forecast of 492,083 transactions (which would have marked a 10.5% increase).

For 2025, CREA sees sales rising by a further 6.2% to 501,902 transactions, fuelled by declining interest rates and growing demand. This projection has also been revised downwards, as it previously saw a 7.8% increase, meaning 530,494 home sales.

Finally, the national average home price is expected to rise by 2.5% in 2024 to $694,393, followed by a 5% rise in 2025, taking it to $729,319. CREA had earlier forecast that 2024 would see 4.9% home price growth (resulting in an average home price of $710,120) and by 7% in 2025 (resulting in an average home price of $760,120).

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.

Best 5-year fixed mortgage rates

Rate	Term	Type	Provider
4.44%	5 years	Fixed	Canadian Lender
4.69%	5 years	Fixed	Meridian Credit Union
4.69%	5 years	Fixed	Canwise
4.74%	5 years	Fixed	Big 6 Bank
4.74%	5 years	Fixed	Desjardins

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 all mortgages contracted in 2024 were fixed-rate mortgages (Source: 2024 CMHC Mortgage Consumer Survey)

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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4.44%

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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 December, almost 95% of mortgage rate inquiries made to Ratehub.ca were for fixed rates. Moreover, according to the 2024 CMHC Mortgage Consumer Survey, 69% of all mortgages contracted in 2024 were for fixed-rate mortgages. The table below, sourced from the same survey, shows the popularity of fixed-rate mortgages in 2024 among the four main categories of people who contracted mortgages.

First-time home buyers	Repeat buyers	Renewers	Refinancers
71%	75%	71%	60%

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.

References and Notes

For more information, check out these helpful pages

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.
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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.
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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.
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