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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. Insights: A number of lenders are reducing their fixed mortgage rates, as bond yields continue to stabilize. Variable mortgage rates remain unchanged.

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WATCH: March 8, 2023 Bank of Canada Announcement

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5-year variable rates: Frequently asked questions

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

How much did variable rates increase in 2022?

Why did variable rates go up so much in 2022?

Should I switch my variable-rate mortgage to a fixed-rate mortgage because the prime rate keeps increasing?

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

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Will variable rates continue to go up in 2023?

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

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A guide to 5-year variable mortgage rates

Jamie David

March 8, 2023 Bank of Canada Announcement Update:

  • On March 8, 2023, the Bank of Canada held the target for the overnight rate. The target for the overnight rate remains 4.50%.
  • Canadians with variable-rate mortgages and home equity lines of credit (HELOCs) will see their rates stay stable for the first time in a year. 
  • With rates remaining unchanged, the threshold for the mortgage stress test remains the same. To calculate how much you can qualify for, use our mortgage affordability calculator.
  • The Bank of Canada had raised this rate, which lenders in turn use to set their Prime rate and variable-rate mortgage products, eight times since March 2022, increasing the target for the Overnight Rate by 425 basis points, from 0.25% to 4.50%. This was the fastest rate-hiking pace seen since the late 1970s. 
  • The Bank expressed its belief that the aggressive measures it has been taking to control inflation appear to be effective, and anticipated that the Consumer Price Index will lower to 3% by the middle of 2023. As long as inflation continues to abate, the Bank is expected to end its rate hike cycle for the remainder of this year. Should this prove to be true, it will allow for the housing market to stabilize, leading to better borrowing options in 2023 as conditions become more predictable. 

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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".
  • Just over 25% of all mortgage requests made to in 2022 were for 5-year variable-rate mortgages.
  • 5-year fixed 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.

Source: Ratehub Historical Rate Chart


The popularity of 5-year variable mortgage rates

Although fixed-rate mortgages are more popular, some 33% of all mortgages in Canada were variable-rate mortgages in 2022 (Source: BNN), 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 experienced a surge in popularity; as mentioned above, a third of all mortgages in Canada in 2022 were variable-rate mortgages, in contrast to 20% in 2019. However, as variable-rate mortgages have climbed to rates nearly on par with (and sometimes higher than) fixed-rate mortgages in the wake of multiple Bank of Canada rate hikes over the course of 2022, their popularity has waned recently. 

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.


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