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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?
Is 5 years the best variable term length?
Jamie David, Business Director Mortgages
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
- 66% of Canadians have 5-year mortgage terms (Source: CAAMP)
- 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 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, 21% of Canadian mortgages have variable and adjustable rates (Source: Statistics Canada). Fixed rates are also slightly more common for the youngest age groups, while older age groups are more likely to opt for variable rates (Source: CAAMP).
The 5-year term, conversely, is the most common duration. This is logical given that five years is the median between the available term lengths between one and ten years.
What drives changes in 5-year fixed 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 competition, strategy, and desired market share.
Historical adjustments to Canada's prime rate
From 2006 - 2020
The bottom line: Should you get a 5-year variable rate?
As long as you're confident that a variable rate is a good fit for you, then a 5-year variable rate is probably a reasonable choice. Variable rates do have the inherent risk of rate rises, so make sure you have enough money in your budget to adjust to a higher mortgage payment.
It's also important to be confident that you won't want to refinance or sell your home in the next 5 years. While the cost of breaking a variable-rate mortgage is less than for a fixed-rate mortgage, it's still a cost that you're better off avoiding if you can.
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.
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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How are CanWise Financial and Ratehub.ca connected?
Both Ratehub.ca and CanWise Financial are owned and operated by Ratehub Inc. When comparing mortgage rates on Ratehub.ca, you’ll see rates from a number of lenders and mortgage brokers, including CanWise Financial. All products are sorted according to the rates available to you and the selection criteria you’ve shared with us.
We’re happy to send users to CanWise because of their great rates, trusted advice, and experienced mortgage team. Read any of their 3,300 five-star Google and Facebook reviews and you’ll see what we mean.