10-year Fixed Mortgage Rates
Historical 10-Year Fixed Mortgage Rates From 2006 - Today
- Mortgage rate is fixed over a 10-year term
- 7% of Canadians have a mortgage terms between 6-10 years
- 66% of Canadians have fixed mortgage rates
- 10-year fixed mortgage rates follow 10-year government bond yields
10-year fixed mortgage rate defined
A 10-year fixed mortgage will have a constant rate of interest over a term of 10 years. The term is not the same as the amortization period – the amount of time it takes to pay off your mortgage – but, rather, is the period you are committed to the contractual provisions and mortgage rate with your lender. Your monthly mortgage payments will be fixed, and you are protected against interest rate fluctuations.
Comparing 10-year fixed mortgage rates
A 10-year fixed mortgage is the most risk-averse mortgage selection. If you need to budget long-term or believe interest rates will rise dramatically over the coming years, it may make sense. For instance, if you feel certain in five years mortgage rates will be higher than the current quoted 10-year rate, locking in for the long-term is a sound strategy. Your monthly mortgage payments will remain constant over a period of 10 years, and you are protected against interest rate fluctuations.
10-Year Fixed vs. Short Term Mortgage Rates From 2006 - Today
However, it is very difficult to forecast the direction interest rates will take over such a long period of time, and there are a number of drawbacks to locking into a mortgage rate for 10 years. The foremost argument against a 10-year term is the premium you will pay for passing on the risk of interest rate fluctuations for 10 years. You should note that your lender takes on more risk the longer your term is, so as the term gets longer the premiums get higher, but in some situations this may be a premium worth paying. One thing to keep in mind is that, after 5 years, the Interest Act states the penalty to break your mortgage cannot exceed 3 months' interest, so you wouldn't need to worry about a potentially much higher Interest Rate Differential (IRD) penalty. However, if the mortgage is broken before 5 years, such a penalty could apply.
Popularity of 10-year fixed mortgage rates
With only 7% of Canadians having mortgage terms between six and 10 years, long terms are not a popular choice in Canada. They are even less popular amongst younger age groups at only 3% uptake in ages 18-34.
Fixed mortgage rates, however, are most common, at 66% of all mortgages in Canada with little variation amongst age groups.
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References and Notes
- Annual state of the Residential Mortgage Market in Canada, CAAMP, 2010