5-Year Fixed Mortgage Rates

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Best 5-Year Fixed Mortgage Rates in Canada

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5-Year Fixed Mortgage in Canada: Full Guide

This Page's Content Was Last Updated: November 23rd, 2022

The 5-year fixed mortgage is Canada's most popular residential mortgage term. According to Statistics Canada, the 5-year fixed mortgage accounted for almost 50% of all mortgages in Canada and more than all variable rate mortgages combined. If you are looking for a new mortgage, planning on switching to a different lender, or refinancing, the 5-year fixed mortgage is the best place to start.

1. Mortgage rate is fixed for a 5-year term
2. Generally has the best mortgage rate compared to other fixed mortgage terms
3. Offered by almost all lenders
4. 66% of mortgages in Canada were fixed-rate mortgages in 2022

As the name suggests, a fixed-rate mortgage is a mortgage with a guaranteed interest rate. This means that the rate of interest you pay on your mortgage will not change for the entire term of the mortgage.

Fixed-rate mortgages are attractive to borrowers because they offer certainty and predictability. You know precisely what your mortgage payments will be for the entire term, which can be helpful in budgeting and planning for the future.

3 and 10 Year Mortgage Terms

The most common mortgage term in Canada is 5 years. The term is the amount of time you are committed to the fixed interest rate. After the 5 years is up, your mortgage will "reset" to the current market interest rates. This means that your monthly mortgage payments could go up or down, depending on where interest rates are.

Some common term options besides a 5-year term would be 3-year or 10-year fixed-rate mortgages. The 3-year fixed-rate mortgage is a shorter commitment, while the 10-year fixed-rate mortgage offers more stability but comes with a higher interest rate. Other options include 1-year fixed mortgages, 2-year fixed mortgages, and 4-year fixed mortgages.

The 5-year fixed mortgage rate has generally gone down over the past 4 decades. In 1981, it peaked at 21.75% as Canada went into a period of stagflation marked by low economic growth and high inflation. As Canada's inflation rate soared in 2022, the Bank of Canada aggressively hiked rates. This drove the Bank of Canada interest rate and the Prime Rate to levels not seen since 2008.

The chart above tracks the posted rate of the top banks in Canada: RBC, TD, BMO, Scotiabank, CIBC, and National Bank. This is the rate that they use to calculate their mortgage break penalty, or the fees you pay when you break your mortgage. It is also used as the Qualifying Rate for the mortgage stress test by the CMHC.

The discounted mortgage rates that are offered by lenders can often be lower than their posted rates, however. Many lenders offer promotional rates or cashback incentives for new clients, but these are usually temporary and apply only to prime borrowers.

The interest rate on a variable rate mortgage can change over time, which means you can pay more interest throughout the term. Although your monthly mortgage payments will stay the same with variable-rate mortgages, increasing interest rates means less of your payment will go toward the principal.

For example, if you have a variable rate mortgage and the rates rise, a higher percentage of your payments will pay interest. This means you won't be paying off your home as quickly and will need to make larger payments in the next term.

The interest rate on a fixed-rate mortgage, on the other hand, will not change for the entire term of the mortgage. This means you won't need to make larger payments in the next term to "catch up" if the market interest rates increase.

While fixed-rate mortgages offer more predictability than a variable rate, the comfort comes at a cost. Fixed-rate mortgages tend to have a higher rate because there is no risk of market interest rate changes. The choice between fixed and variable rate mortgages depends on your risk tolerance. Do you prefer predictability in exchange for potentially paying off your home slower, or want a lower interest rate today in exchange for added risk?

RBC is the largest bank in Canada. It was founded in 1864 as The Merchants Bank of Halifax. Today, it manages over $1 trillion and even tried to merge with BMO in 1998. Their 5-year mortgage terms come with the following features:

• Double-Up Payments: Once every 12 months, you can double your mortgage payment.
• Annual Mortgage Prepayment: Ability to pre-pay your mortgage principal up to 10% once every 12 months.
• Skip A Payment: Easily skip one month's worth of mortgage payments every 12 months.

Tracing back to 1855, TD Bank was initially founded by merchants and millers. As of 2021, TD has over 25,000 employees, making it the second-largest bank in Canada. With a TD 5-year mortgage, you have access to the following features:

• Increase Your Mortgage Payment: Once every 12 months, you can double your mortgage payment.
• Annual Mortgage Prepayment: Pre-pay up to 15% of your mortgage principal once every 12 months.
• Payment Pause: Skip one month's worth of mortgage payments once every 12 months.
• Payment Vacation: Once per term, the ability to skip up to four months worth of payments. Depends on how much you have pre-paid.

Founded in 1832, Scotiabank is the third-largest bank in Canada. It operates in over 30 countries focusing on Latin America and the Caribbean. Their 5-year mortgages come with the following features:

• Match-A-Payment: Once every 12 months, you can double your mortgage payment.
• Annual Mortgage Prepayment: Ability to pre-pay up to 15% of your mortgage principal once every 12 months.
• Miss-A-Payment: Once per mortgage term, you can miss a payment only if you have already matched a payment.

Founded in 1867, CIBC is the fifth-largest bank in Canada. It has a network of 1,100 branches and 3,500 ATMs across Canada. 5-year fixed mortgages from CIBC come with the following features:

• Increase Your Mortgage Payment: Once every 12 months, you can double your mortgage payment.
• Annual Mortgage Prepayment: Ability to pre-pay up to 20% of your mortgage principal once every 12 months.

CIBC does not offer the option to skip a payment without penalties.

The Bank of Montreal was founded in 1817, making it the oldest financial institution in Canada. It is also the fourth-largest bank in Canada. Their 5-year fixed mortgages come with the following features:

• Permanently Increase Your Mortgage Payments: Once every 12 months, the ability to permanently increase your mortgage payments up to 20%.
• Annual Mortgage Prepayment: Ability to pre-pay up to 10% of your mortgage principal once every 12 months.
• Skip A Payment: Skip one month's worth of mortgage payments once every 12 months.

The yield curve shows the relationship between interest rates and time. It’s commonly used to visually graph government bond yields based on their time to maturity. A normal yield curve would be upward sloping. That’s because investors generally require a higher interest rate (yield) when they lend money for a longer period of time. When the yield curve flattens or inverts, it’s often seen as a sign that investors are concerned about future economic growth and inflation.

Mortgage rates generally follow government bonds. For example, 5-year fixed mortgage rates would mirror movements in the Canada 5-year bond yield, while 10-year fixed mortgage rates would mirror the Canada 10-year bond yield. If the yield curve inverts, then this may be reflected in Canada mortgage rates.

Note: Rates shown are the average mortgage rates from all lenders on WOWA.ca, for insured mortgages with a 25-year amortization. Yields shown are Government of Canada bond yields. Updated November 2022.

In 2022, shorter-term mortgage rates started to become higher than rates for longer-term mortgages. This reflects the inversion of the yield curve in Canada. 1-year fixed mortgage rates became higher than 5-year fixed rates. However, this didn’t apply to longer mortgage terms, such as 7-year mortgages or 10-year mortgages. Rates for terms from 1 year to 5 years have inverted, while rates for terms from 5 years to 10 years remain normal.

Note: Rates shown are the average mortgage rates for RBC, TD, CIBC, Scotiabank, BMO, and National Bank, if offered, for insured mortgages with a 25-year amortization. Yields shown are Government of Canada bond yields. Updated November 2022.

What does an inverted yield curve mean for mortgage borrowers? For starters, it might signal that mortgage rates will decrease in the future. An inverted yield curve could be a sign for an upcoming recession, which will cause interest rates to fall. You could lock-in a 5-year mortgage at a low rate today, but it’s possible for rates to fall further during these five years. If you want the flexibility that comes with a shorter-term mortgage, you’ll be paying for it with a higher interest rate today.