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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: Bond yields continue to rise, now in the 3.6% range, following US CPI news, which could put upward pressure 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.

As of:

RateProviderPayment

Canadian Lender

$2,517

Canwise

A Ratehub Company

$2,552

CMLS Financial

$2,588

First National

$2,599

Equitable Bank

$2,599

MCAP

$2,647

WATCH: March 6, 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 go down in 2024?


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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March 6, 2024 Bank of Canada announcement update

On March 6, 2024, the Bank of Canada held its target for the overnight rate unchanged at 5.00%.

  • Multiple important economic indicators justified the Bank’s fifth consecutive rate hold, including a softening economy, a reduction in consumer spending and slackening wage growth.
  • While the Bank’s commentary highlighted the fact that inflation is gradually easing, it nonetheless noted that January’s CPI reading of 2.9% remained above its target of 2%. In consequence, the Bank indicated that higher rates were needed for longer in order to get inflation down to where it should be.
  • Canadians with variable-rate mortgages and home equity lines of credit (HELOC) will be glad to see their mortgage rates remain stable, but will almost certainly be a bit disappointed not to get any indication of imminent rate cuts.
  • Those with variable-rate mortgages who have not already hit their trigger rate can breathe a sigh of relief knowing that they will not pass that threshold.
  • While fixed mortgage rates aren’t directly tied to the Bank of Canada’s rate decisions but rather to the bond market, the Bank of Canada’s commentary can incite bond yields to rise or fall. With this rate hold largely anticipated, however, bond yields have remained relatively stable. As such, we can expect lenders to keep their fixed mortgage rates where they are for the near future.
  • Anyone shopping for a home or whose mortgage is up for renewal should obtain a rate hold to protect themselves from any unexpected rate rises. 
  • This announcement has the potential to cause home prices to rise. Although it made no mention of when rate cuts could come, anticipation of them has brought buyers off the sidelines in force since the start of the new year.

 

February 2024: Mortgage market update

The Canadian mortgage market has been characterized by significant volatility of late, and the first weeks of 2024 have proven to be no exception so far. Historically high bond yields have resumed climbing after a brief lull, exerting upward pressure on fixed mortgage rates. Meanwhile, the Bank of Canada’s 10 rate hikes from March 2022 to July 2023, which brought the target for the overnight rate to 5%, have left variable mortgage rates elevated. If you’re looking to get a mortgage in Canada, here’s what you need to know:

  • Real estate update: On February 14, 2024, the Canadian Real Estate Association (CREA) came out with the latest housing market figures for the month of January. The most recent numbers indicate that the Canadian housing market is seeing the beginning of a rebound in activity after a slow Q4 in 2023. Some 25,540 homes changed hands across the country in January, marking a 3.7% month-over-month increase, and up by an astonishing 22% annually. New listings rose by 1.5%, but not enough to alleviate pressure on the market from renewed demand. The average home price in Canada climbed to $659,395, up by 7.6% from the same period last year. Increased sales have caused the country’s balanced market to veer into the “seller-friendly” side of balanced, with a sales-to-new-listings ratio (SNLR) of 58.8% in January. CREA uses the SNLR to gauge competition in the marketplace, with 40-60% indicating a balanced market, with above and below that range indicating sellers’ and buyers’ markets, respectively.

    Read more: Canadian realtors hopeful sales growth will continue

  • CPI update: 2024 is starting off with some good news for Canadian consumers, as the latest Consumer Price Index (CPI) reading from Statistics Canada for the month of January came in at just 2.9%, beating expectations and marking the first time since March 2021 that inflation grew at a rate less than 3%. Falling gas prices were the biggest factor in this lower CPI reading, coming in at 3.2% in January compared to 3.5% the previous month - in fact, gas prices have been steadily softening over the past five months. Food costs were also down notably at just 3.4%, well below the previous month’s figure of 4.7%. This latest CPI reading falls within the Bank of Canada’s inflation target range of 1 - 3%, so we can reasonably expect that the Bank will hold rates steady for a while longer. If inflation continues to trend downwards, many expert observers are predicting that the central bank will effect rate cuts as soon as the second quarter of 2024.

Read more: Inflation falls to 2.9% in January

 

2024 Housing market forecast

Taking into consideration expectations of rate cuts and bottled-up buyer demand, CREA has updated its forecast for 2024 and 2025. 

The organization projects that some 489,661 residential properties will change hands in 2024, representing a 10.4% increase from 2023. Growth is predicted to be strongest in areas where demand for homes has remained consistently robust, such as Alberta. Nevertheless, even markets that have suffered from historically low sales, among them Ontario, British Columbia and Nova Scotia, will also experience increased housing market activity. Unsurprisingly, the average home price in Canada is predicted to climb by 2.3% to $649,173 in 2024, with the most notable price growth expected in Alberta, Quebec, New Brunswick, Nova Scotia and Newfoundland and Labrador. That said, British Columbia and Ontario home prices are forecast to remain relatively flat. 

2025 is expected to see activity rebound even further, with a prediction that some 525,498 homes will sell by the end of the year (an annual increase of 7.1%). The average home price in Canada is projected to rise by 4% to $722,063.


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.
  • 25% of all Canadian mortgage-holders had a variable-rate mortgage as of the end of 2022 (Source: Mortgage Professionals Canada)


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 shy of 5% of all rate requests to Ratehub in January - September 2023. 

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. 

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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! 

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