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5-year variable mortgage rates in Canada

To see mortgage rates for other terms and types, click on the filters icon beside down payment percentage.

ratehub.ca insights: Variable mortgage rates have fallen this week, following the 50 basis point cut implemented by the Bank of Canada on Wednesday. Bond yields, however, have increased to the 2.9% range, which could prevent any fixed-rate decreases in the short term. Getting a pre-approval is recommended when shopping to lock in a rate for up to 120 days.

As of:

RateProviderPayment

Canadian Lender

$2,154

Big 6 Bank

$2,187

Canwise

A Ratehub Company

$2,187

First National

$2,209

Alterna Savings

$2,209

CMLS Financial

$2,209

WATCH: December 11, 2024 Bank of Canada announcement

5-year variable rates: Frequently asked questions

What is the best 5-year variable mortgage rate in Canada?


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


Will variable mortgage rates continue to go down in 2025?


Should I switch my variable-rate mortgage to a fixed-rate mortgage if the prime rate increases?


Is it worth getting a variable-rate mortgage?


What impact do elevated variable rates have on the stress test?


What is Canadian Lender and Big 6 Bank?


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

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December 11, 2024 Bank of Canada announcement update

On December 11, 2024, the Bank of Canada (BoC) reduced its target for the Overnight Lending Rate by 0.5%, bringing it down to 3.25%. This marks the fifth consecutive rate cut since June 2024, with a total reduction of 175 basis points from the previous high of 5%. This is the second 50-basis-point cut in a row, following the October 2024 announcement.

  • The decision was influenced by weaker-than-expected economic performance, with Canada’s GDP growth slowing to 1% in the third quarter and unemployment rising to 6.8% in November.
  • The prime rate at most lenders will fall to 5.45%, resulting in lower monthly payments and reduced interest portions for borrowers with variable-rate mortgages and home equity lines of credit (HELOCs).
  • Fixed mortgage rates, though not directly tied to the Bank’s rate, may experience reductions as five-year bond yields have already dropped to 2.8%. 
  • For homeowners nearing mortgage renewal in 2025, the rate cut offers an opportunity to secure lower renewal rates. By securing a rate hold now, borrowers can lock in the lowest rate they qualify for, protecting themselves from potential future rate increases during the renewal process.
  • The BoC signaled that it may take a slower pace with future rate cuts in 2025, as the policy rate is now significantly lower than in June 2024. Any further reductions will be assessed on a case-by-case basis.

November 2024: Mortgage market update

The housing market in Canada has seen a rather quiet year so far, as buyers are staying on the sidelines in anticipation of lower rates. With the Bank of Canada having implemented its fourth policy rate cut in 2024 and further cuts broadly expected, home sales have finally started to pick up.  

Variable mortgage rates have fallen in proportion to the Bank of Canada’s 50-points October rate cut, and, with another rate cut anticipated in December, further downward pressure on rates is on the horizon. 

Fixed rates are tied to bond yields, which have tumbled in the wake of the Bank of Canada’s rate cuts. As a result, fixed mortgage rates have decreased slightly as well. 

Overall, though, when looked at from a historical perspective, both fixed and variable mortgage rates are currently elevated. Anyone shopping for a mortgage rate in Canada today should be aware of the economic factors below.

  • Real estate update: In the latest market data for October 2024, the Canadian Real Estate Association (CREA) reported a dramatic rebound in the housing market. A total of 44,041 houses were sold, marking a 30% increase compared to October 2023 and the highest activity since April 2022. This surge reflects the impact of four Bank of Canada rate cuts since June, including a notable 50-basis-point reduction in late October. The national average home price rose 6% year-over-year to $696,166, though the MLS Home Price Index, which captures typical market trends, showed prices have lowered 2.7% compared to the same period last year. While new listings decreased by 3.5% in October, the overall supply remains stable after September’s surge. The sales-to-new-listings ratio (SNLR) rose to 58% in October, up from 52% in September and exceeding the long-term average of 55%. CREA considers an SNLR between 45% and 65% as indicative of a balanced market. While conditions currently favor both buyers and sellers, a continued decline in new listings could tighten supply in the coming months, increasing competition. As further rate cuts are expected in December and 2025, CREA anticipates heightened activity in the coming months.

    Read more: National home sales rise 30% in October

  • CPI update: The latest inflation data released by Statistics Canada on November 19, 2024 shows that the Consumer Price Index (CPI) rose to 2%, up from 1.6% in September, reflecting modest increases in consumer costs. This rise was driven largely by slower declines in gas prices (-4%) and higher food costs. While overall inflation saw an uptick, housing costs showed signs of moderation. Mortgage interest costs, a significant contributor to the CPI, grew by 14.7%, down from 16.7% in September, thanks to the Bank of Canada’s four consecutive interest rate cuts. Rent price growth also slowed, rising 7.3% compared to 8.2% the previous month, providing some relief to renters. Despite the inflation uptick, analysts expect the Bank of Canada to continue its rate-cutting path, with another reduction likely at the December 11 announcement. However, the pace may slow to 25 basis points as the central bank balances inflation with weak economic momentum. Upcoming GDP and employment data in late November will also play a critical role in shaping the Bank’s next moves. For now, the easing pressure in housing costs and broader inflation stabilization provide cautious optimism for borrowers and the economy alike.

    Read more: Canadian inflation increases to 2% in October

What the November Fed rate cut means for Canadians

On November 7, 2024, the US Federal Reserve announced a quarter-point cut to its benchmark interest rate, marking its second consecutive reduction following a half-point cut in September. This decision aims to manage inflation, which has decreased from a peak of 9.1% in June 2022 to 2.4% in September.

The Fed’s future path for rate cuts has become less predictable, particularly in light of the recent US Federal Election. President Elect Donald Trump's economic proposals could potentially reignite inflation. He has also raised concerns about the Fed's independence in monetary policy decisions. 

The latest rate cut is compounded by rising bond yields in the US, notably following Trump's victory.  This trend extends to Canada, where the government of Canada's five-year bond yield recently rose above 3%, suggesting that fixed mortgage rates will increase, leading to higher borrowing costs for Canadian homeowners and potential buyers.

As both Canadian and US economies navigate potential volatility, borrowers are advised to prepare for fluctuating interest rates in the coming months. 

Also read: US Federal Reserve cuts rate by 0.25% in November announcement

Canadian mortgage reform update

On September 16, 2024, the federal government announced sweeping changes to mortgage qualification rules for first-time home buyers, as well as those purchasing newly-constructed homes.

As of December 15, 2024:

  • 30-year amortizations will be available for all first-time home buyers, regardless of whether they have an insured mortgage. These extended amortizations are also available for any purchase of new construction.

  • The maximum purchase price for an insured mortgage (where less than 20% down is paid) will be increased to $1.5 million, from the current $1 million.

These are some of the most impactful mortgage reforms announced since 2012, and are anticipated to increase first-time home buyers’ affordability and access to the housing market. 

Learn more about these new mortgage rule changes on the Ratehub.ca blog

Best 5-year variable mortgage rates +

5-year variable mortgage rates: Quick facts

  • Variable mortgage rates fluctuate with the prime lending rate.
  • Variable rates are typically stated as "prime plus or minus a percentage".
  • Some 5.36% of all mortgage requests made to Ratehub.ca from January - December 2023 were for 5-year variable-rate mortgages.
  • 5-year fixed mortgage rates are driven by 5-year government bond yields.
  • 23% of consumers opted for a variable-rate mortgage in 2024, down from 27% in 2023. (Source: 2024 CMHC Mortgage Consumer Survey)


Historical 5-year variable mortgage rates

Checking historical mortgage rates is a great way to properly understand which mortgage terms attract lower rates and whether rates are especially high or low at any given moment. Here are the lowest 5-year variable 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 variable mortgage rates

Although fixed-rate mortgages are more popular, according to Mortgage Professionals Canada, 25% of Canadian mortgage-holders had variable-rate mortgages at the end of 2022, making it the second most popular type of mortgage.

Historically, fixed rates are generally more popular, however, in the wake of the COVID-19 pandemic, the Bank of Canada cut its target overnight lending rate in March 2020, which caused the prime rate to go down. As a result, variable-rate mortgages experienced a surge in popularity; as mentioned above, roughly 25% of all mortgages in Canada at the end of 2022 were variable-rate mortgages, in contrast to 20% in 2019. However, as variable-rate mortgages have climbed to rates significantly higher than fixed-rate mortgages in the wake of multiple Bank of Canada rate hikes over the course of 2022, their popularity has waned considerably in 2023. While some 26% of all rate inquiries to Ratehub.ca in 2022 were for 5-year variable rates, they accounted for just 5.36% of all rate requests to Ratehub in 2023. Moreover, according to the 2024 CMHC Mortgage Consumer Survey, 23% of consumers opted for a variable-rate mortgage in 2024 (down from 27% in 2023). 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
20% 21% 22% 28%

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.

What drives changes in 5-year variable mortgage rates?

As previously mentioned, the 5-year variable mortgage rate will fluctuate with any movements in the prime lending rate, which is the rate at which banks lend to their best and most credit-worthy customers. The variable mortgage rate is typically stated as prime plus/minus a percentage discount/premium.

Canada’s prime rate is influenced primarily by economic conditions. The Bank of Canada adjusts it depending on the state of the economy, determined by various factors in employment, manufacturing, and exports. Together, these shape the inflation rate. When inflation is high, the Bank of Canada must act to avert an over-stimulated economy. They will increase the prime rate to make the act of borrowing money more expensive.

Conversely, in cases where inflation is low, the Bank of Canada will decrease the prime rate to stimulate the economy and improve the attractiveness of borrowing. The discount/premium on the prime rate applied to the variable mortgage rate is set by the banks, based on their rate strategy and desired market share. 

See today's best mortgage rates

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4.14%

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The bottom line: Should you get a 5-year variable rate?

As long as you're comfortable with risk and understand that variable rates can fluctuate throughout your term, then a 5-year variable rate is a reasonable choice. Since variable rates do have the inherent risk of rate increases, make sure you have enough money in your budget to cover a higher mortgage payment if rates increase.

If you're still not sure about what mortgage product is right for you, it's a good idea to speak to a mortgage broker. Consultations are free, and you'll leave with expert advice, personalized to you.

 

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.

    read more