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Best 5-year variable mortgage rates

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RateTermTypeProvider
Featured1.90%
5 yearVariable

Canadian Lender

Featured1.90%
5 yearVariable

CanWise

Featured2.10%
5 yearVariable

Alterna Savings

Featured2.30%
5 yearVariable

First National

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5-year variable rates: Frequently asked questions

What are 5-year variable mortgage rates?


How much can I save comparing 5-year variable rates?


Why compare 5-year variable rates with Ratehub.ca?


What are the pros and cons of variable rates?


What is the best 5-year variable rate mortgage for me?


Is 5 years the best variable term length?


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A guide to 5-year variable mortgage rates

5-year variable-rate mortgages are a common type of mortgage in Canada. With variable rates presenting more risk than fixed rates, it’s especially important to find the best possible deal. Ratehub.ca helps you compare rates from Canada’s leading banks, brokers, and other lenders, at no cost to you.

Read on to learn more about 5-year variable rates, or use the tools at the top of this page to learn what rates could be available to you in just a couple of minutes.

Best 5-year variable mortgage rates +

5-year variable mortgage rates: Quick facts

  • Mortgage rates fluctuate with the prime lending rate.
  • Variable rates are typically stated as "prime plus or minus a percentage".
  • 22% of Canadians had variable mortgage rates in 2020. (Source: Mortgage Professionals Canada)
  • 17% of all mortgage requests made to Ratehub.ca in 2021 were for 5-year variable-rate mortgages, a 50% increase over 2020.
  • 5-year mortgage rates are driven by 5-year government bond yields.

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.

2018 2019 2020 2021
5-year variable 1.85% 2.36% 0.99% 0.85%
5-year fixed 2.79% 2.29% 1.39% 1.39%
1-year fixed 2.69% 2.49% 1.64% 1.54%
3-year variable 1.99% 2.89% 2.35% 0.99%
Prime Rate 3.20% 3.95% 2.45% 2.45%

Source: Ratehub Historical Rate Chart

 

The popularity of 5-year variable mortgage rates

Although fixed-rate mortgages are more popular, 22% of Canadian mortgages have variable and adjustable rates (Source: Mortgage Professionals Canada), making it the second most popular type of mortgage. Fixed rates are slightly more common for the youngest age groups, while older age groups are more likely to opt for variable rates (Source: CAAMP).

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 are experiencing a surge in popularity; the number of new homes purchased in 2020 with variable-rate mortgages was 50% higher than in 2019. 

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. Since March 2020, the prime rate has remained unchanged in light of the economic effects of the COVID-19 pandemic; however, the prime rate is expected to rise again in Q1 of 2022.

Historical adjustments to Canada's prime rate

From 2006 - 2020

Adjustments to Canada rime rate 2006-2020

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! 

Author bio

Jamie David

Jamie David is the Business Director of Mortgages at Ratehub.ca. A graduate of the Systems Design Engineering program at the University of Waterloo, she has over 15 years of business, marketing, and engineering experience in the financial technology, banking, education, energy and retail industries. She has worked in top organizations like TD Bank, Trading Pursuits, Petro-Canada, and the TTC. Her passion for personal finance, investing, education, and business strategy brought her to Ratehub.ca where she heads a very talented, cross-functional team that is dedicated to providing Canadians with the best mortgage experience all the way through from online search to (keys-in-your-hand) funded mortgage.

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About Ratehub.ca

Whether you need a mortgage, credit card, savings account, or insurance coverage, we help you find and compare the best financial products for your specific needs.

When it comes to mortgages, Ratehub.ca is more than just the place to research and compare the best rates. Get your mortgage at Ratehub.ca and have the best of both worlds – online rates and award-winning customer service.

Ratehub.ca has been named Canada's Mortgage Brokerage of the Year for four years straight (2018-2021). With over 12 years of mortgage experience, and $11 billion in mortgages funded, we deliver you the best mortgage experience in Canada, from online search to close.

How does Ratehub.ca make money?

Financial institutions pay us for connecting them with customers. This could be through advertisements, or when someone applies or is approved for a product. However, not all products we list are tied to compensation for us. Our industry leading education centres and calculators are available 24/7, free of charge, and with no obligation to purchase. To learn more, visit our About us page.

How are CanWise Financial and Ratehub.ca connected?

We own and operate a mortgage brokerage, Ratehub.ca (formerly known as CanWise Financial), and are compensated for mortgages funded through our brokerage. Ratehub Inc. o/a Ratehub.ca & CanWise is a licensed mortgage brokerage and CMHC-approved lender. When comparing mortgage rates on Ratehub.ca, you’ll see rates from a number of lenders, including CanWise. All products are sorted according to the rates available to you and the selection criteria you’ve shared with us. Both Ratehub.ca and CanWise are owned and operated by Ratehub Inc.

We’re proud of our Ratehub.ca mortgage brokerage, which offers our users great rates, trusted advice and an award-winning team of mortgage experts. Read any of our 6,700 five-star Google and Facebook reviews and you’ll see what we mean.

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