Find the best 5-year fixed mortgage rates in Canada

April 2024: Mortgage market update 

After a volatile start to the year, there are some hopeful signs that indicate a coming improvement in sales activity. Among market observers, sellers and buyers alike, expectations are growing that there could be a rate cut from the Bank of Canada as soon as the summer. In the meantime, however, bond yields continue to be volatile and unpredictable, as anxious investors react swiftly to various economic reports from Canada, the US and beyond. After a brief period of lows during the winter, bond yields have climbed up to the 3.7% range, spurred in part by the US Federal Reserve’s “higher for longer” position. For the moment, both fixed and variable mortgage rates continue to be at some of their highest levels in recent years. If you’re looking to get a mortgage rate in Canada, read on for some key economic information you should know about.

• Real estate update: On April 12, 2024, the Canadian Real Estate Association (CREA) published the most recent figures for the Canadian housing market for the month of March. The latest data indicates that the market is relatively flat right now, but there are signs that optimism related to rate cuts on the horizon could spur a rise in demand during the spring months. Per CREA, home sales across the country rose by just 1.7% on an annual basis and 0.5% on a monthly basis for a total of some 42,633 homes sold. The average home price in Canada rose by 2%, coming in at $698,520, while the MLS Home Price Index, which measures the most typical type of home sold, was also roughly flat (up by just 0.7%). New listings fell by -1.6% on a monthly basis, which caused the sales-to-new-listings ratio, a metric that measures the level of competition in the housing market, to rise to 57.4%. Despite this rise in the SNLR, the national housing market remains balanced - CREA considers a range from 45 - 65% to be balanced, with above and below that threshold representing buyers’ and sellers’ markets, respectively. While new listings have fallen on a monthly basis, from an annual perspective, supply is recovering steadily from the record lows seen through most of 2023. Some 76,021 listings came to market throughout Canada in April, marking a 10% yearly increase.
  
  Read more: Canadian home sales were flat in March, but rate cut boost expected
  
  
• CPI update: On April 16, 2024, Statistics Canada released the latest March Consumer Price Index (CPI). The most recent data reveals that the headline inflation number rose on a monthly basis by 0.1%, coming in at 2.9%. Much of this increase is due to rising gas prices, while shelter inflation (which includes both mortgage interest costs and rents) rose by 6.5% annually, making it the single largest contributor to the CPI. In some good news, food inflation has slowed markedly, registering at just 1.9%. Crucially for the Bank of Canada, both the “core” median and trim inflation measures lowered to 2.8% and 3.1%, respectively. These are the measures observed most intensely by the central bank, and are the primary drivers behind its interest rate decisions. While the Bank wants to see both of these metrics below the 3% mark, this inflation report lends credence to the idea that rate cuts could come as early as June. However, April’s CPI will be coming out before the Bank’s next rate announcement on June 5, 2024, so we will have to wait and hope for more positive indicators there before we can say with more confidence whether we can hope for a summer rate cut.

Read more: Canadian CPI comes in at 2.9% in March

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 492,083 homes will be sold in 2024, an annual increase of 10.5% 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 past couple of years, like Ontario, BC and Nova Scotia, are set to experience growth. The average home price in Canada is expected to rise by 4.9$ to $710,468 in 2024.

Housing market activity is expected to continue to increase in 2024, with sales forecast to reach 530,494 homes, representing an increase of 7.8%. The average home price in Canada is projected to come in at $760,120, up by 7%.

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.

April 10, 2024 Bank of Canada announcement update

On April 10, 2024, the Bank of Canada held its target for the overnight rate steady at 5.00%.

• Multiple data points justified another rate hold, including stalled economic growth and slacker labour market conditions. The Bank was clear in its commentary that it remained in a “wait and see” mode, watching closely to ensure that inflation is well and truly tamped down to its 2% target.
• Although the Bank noted that significant progress has been made in effort to get inflation under control, it also pointed out that February’s CPI of 2.8% was still above its 2% target, and, as a result, higher rates would need to be maintained for longer in order to tamp inflation down to 2%. The Bank does not want to run the risk of prematurely cutting rates, only to see inflation go soaring once again.
• Fixed mortgage rates are tied to the bond market rather than the Bank of Canada’s rate decisions, but the Bank’s commentary can move bond yields. However, this rate hold was largely anticipated, and the bond market has been largely unaffected. We can expect lenders to keep fixed mortgage rates where they are in the near future.
• Holders of variable-rate mortgages and home equity lines of credit (HELOC) will be happy to see their rate remain stable, but will probably be disappointed that there were no indications of rate cuts on the horizon.
• Anyone with a variable-rate mortgage or a home equity line of credit (HELOC) will need to continue to be patient, as the Bank has indicated no change in the timing of potential rate cuts.
• As it represents a continuation of the approach seen over the last several months, the Bank’s announcement is likely to have little impact on home prices. Buyers and sellers are already motivated by the prospect of rate cuts towards the end of 2024 or into 2025, and the Bank has not adjusted that timetable at all.
  
  

5-year fixed mortgage rates: Quick facts

• 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. 
  

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.

References and Notes

1. Trends in the Canadian Mortgage Market: Before and During COVID-19, Statistics Canada, 2021
2. Annual State of the Residential Housing Market in Canada, Mortgage Professionals Canada, 2021
3. Housing Market Report: 2022 Year-End Consumer Survey and Outlook, Mortgage Professionals Canada, 2023

For more information, check out these helpful pages 

• Best Mortgage Rates in Canada
• 5-Year Variable Mortgage Rates
• Variable or Fixed Mortgage Rates
• Amortization
• Mortgage Term vs. Amortization
• Is a 5-Year Fixed-Rate Mortgage Term Right For You?
• Porting and Assuming Your Mortgage