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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: Government of Canada five-year bond yields have started the week in the 3% range, 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 rates are stable.

As of:

RateProviderPayment

Canadian Lender

$2,243

Big 6 Bank

$2,299

First National

$2,299

Canwise

A Ratehub Company

$2,299

CMLS Financial

$2,321

Desjardins

$2,344

WATCH: October 23, 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 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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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

October 23, 2024 Bank of Canada announcement update

On October 23, 2024, the Bank of Canada reduced its target for the Overnight Lending Rate by 0.5%, lowering it from 4.25% to 3.75%. This is the fourth consecutive rate cut since June 2024, marking a cumulative reduction of 125 basis points from the previous high of 5%.

  • The decision was primarily driven by the continued drop in inflation, with the Consumer Price Index (CPI) falling to 1.6% in September, well below the BoC’s 2% target. Weak economic growth and declining GDP per capita also motivated the central bank to move more aggressively with this half-point cut.
  • For Canadians with variable-rate mortgages or home equity lines of credit (HELOCs), the decrease in the prime rate to 5.95% means lower monthly payments and reduced interest portions.
  • While fixed mortgage rates are not directly impacted by the Bank’s rate cuts, bond markets have reacted with five-year bond yields at 2.9%. This will likely lead to further reductions in fixed mortgage rates as more lenders adjust their offerings.
  • Prime-based savings products, such as high-interest savings accounts and GICs, will see lower returns following this rate cut. Savers and passive investors should consider acting now to lock in better rates before they drop further.

October 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 third policy rate cut since March 2020 on September 4 (the first two having been in June and July) and further cuts broadly expected, it is possible that home sales will finally start to pick up.  

Variable mortgage rates have fallen in proportion to the Bank of Canada’s September rate cut, and, with another rate cut anticipated in October, 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 cut and a number of economic reports from Canada and the US. 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: The Canadian housing market gained momentum in September 2024, with home sales rising by 6.9% year-over-year, totaling 37,733 transactions, according to the Canadian Real Estate Association (CREA). This increase follows the Bank of Canada’s three quarter-point rate cuts from June 2024, enticing more buyers back into the market. Mortgage rates have become more favorable, driving renewed demand among prospective homeowners. The national average home price increased by 2.1% year-over-year to $669,630, reflecting the increased buyer activity, while newly listed properties rose by 4.9% from August, creating more options for buyers. However, overall inventory remains below the historical average at 4.1 months, pointing to balanced conditions in the housing market. According to CREA, inventory levels between 3.6 and 6.5 months indicate a balanced market. In light of these trends, CREA has slightly lowered its forecast, now expecting 468,900 home sales in 2024. However, with further interest rate cuts anticipated in 2025, sales are projected to increase by 6.6% next year.

    Read more: National home sales rise in September following summer rate cuts

  • CPI update: The latest inflation data released by Statistics Canada on October 15, 2024, shows that the Consumer Price Index (CPI) increased by just 1.6% year-over-year in September, significantly lower than both the expected 1.8% and the Bank of Canada’s 2% target. This marks the lowest inflation growth since early 2021, largely driven by a steep -10.7% drop in gasoline prices. Mortgage interest costs, a major factor in the CPI, continued their downward trend, with year-over-year growth slowing to 16.7% from 18.8% in August. This indicates that the effects of previous rate cuts by the Bank of Canada are beginning to ease pressure on borrowers. With inflation now under the central bank’s target, experts predict the Bank of Canada will move swiftly to reduce interest rates further. There is growing consensus among analysts that a half-point rate cut could be announced on October 23, lowering the overnight rate to 3.75% and providing much-needed relief to borrowers.

    Also read: Canadian CPI falls to 1.6% in September, increasing chance of half-point rate cut

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

Canadian mortgage affordability update in October 2024

In August 2024 – the latest month analyzed by Ratehub.ca’s Affordability Report – home affordability improved across many Canadian markets as mortgage rates declined. Following a series of rate cuts by the Bank of Canada, variable mortgage rates saw downward pressure, offering some relief to prospective home buyers. 

According to the data, 12 of 13 major Canadian housing markets experienced better affordability as borrowing costs fell and home prices softened. In Toronto, the required income to buy a home decreased by $4,850, driven by a $15,100 drop in the average home price. Meanwhile, markets like Victoria and Vancouver also saw a modest improvement in affordability.

Variable mortgage rates, tied to the Bank of Canada's overnight lending rate, fell as the central bank reduced its target rate consecutively in June and July 2024. While variable rates remain higher than their historical lows, further rate cuts are expected, which could continue to improve affordability conditions across Canada. 

In addition to the rate cuts, newly introduced mortgage qualification rules are set to further enhance affordability for first-time home buyers. These changes include raising the insured mortgage purchase price cap to $1.5 million and extending amortization periods to 30 years, significantly lowering the barrier to entry in Canada’s expensive housing market.

Read more: Dropping mortgage rates improved home affordability in August

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. 

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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.

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