1-year Fixed Mortgage Rates
Historical 1-Year Fixed Mortgage Rates From 1980 - Today
- Mortgage rate is fixed over a 1-year term
- 6% of Canadians have mortgage terms of one year
- 66% of Canadians have fixed mortgage rates
- 1-year fixed mortgage rates follow 1-year government bond yields
1-year fixed mortgage rates defined
The mortgage term, in this case one year, is the length of time your mortgage rate is in effect. If you select a 1-year fixed rate, you will be able to select a new mortgage type, provider and associated mortgage rate at no penalty come the end of the year.
The mortgage term you choose depends on your expectations of future interest rates. For example, if you think mortgage rates will go up, you may want a longer 5-year term to lock in the current low rate. However, if you feel interest rates will fall, or you want to renegotiate your mortgage in a year's time, you would consider a 1-year mortgage rate.
Comparing 1-year fixed mortgage rates
Most consumers are uncertain which direction mortgage rates will take in the near future. Further, many are unsure if variable or fixed mortgage rates will better serve their financial situation; so, you can select a 1-year fixed rate and observe the market.
Since 1-year fixed mortgage rates are almost always lower than 5-year fixed rates, in falling or flat interest rate environments, some consumers continually lock in to a 1-year fixed mortgage rate year after year. However, a similar strategy can be achieved through variable mortgage rates, which are usually lower than 1-year fixed mortgage rates and can always be converted to a fixed mortgage rate at no charge.
1-Year Fixed vs. Longer Term Mortgage Rates From 2006 - Today
Some home owners opt for a 1-year fixed mortgage rate because they plan to move in a year. The problem with this strategy is that unless the home owner is moving in exactly one year, they will incur a penalty for breaking their mortgage early. Thus, a variable mortgage rate often makes sense in this case as the interest rate is often lower, and the refinance penalty, three months interest, will be lower than refinancing a fixed mortgage.
Popularity of the 1-year fixed mortgage rate
Though fixed rate mortgages are very common, representing 66% of all mortgages, the 1-year mortgage term is one of the least popular terms, representing only 6% of the Canadian market. The popularity of 1-year mortgage rates in Canada does not vary dramatically by age.
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References and Notes
- Annual state of the Residential Mortgage Market in Canada, CAAMP, 2010