There are several important parts to this question, so let’s look at each one at a time to fully understand the financial landscape for current 8-year fixed mortgage rates.
The mortgage term describes the length of the mortgage contract — in this case, eight years. The contract spells out how long you’ve agreed to work with a specific lender, how your interest rate will be set during that period, and any other conditions you’ve agreed to abide by during that time.
After the eight-year mortgage term is up, you can renew your contract with the same lender or switch to a different lender. The conditions of the contract can change at this time, including how your interest rate is set and other rules you have to follow.
Fixed vs. variable rates
Along with choosing your preferred mortgage term, another important decision you’ll need to make is the type of interest rate. There are two options: a fixed rate or variable rate.
Variable rates may be adjusted by your lender throughout the mortgage term based on market conditions. Variable interest rates are often lower compared to fixed rates, but there is more risk built in. If you opt for a variable rate mortgage and interest rates drop during your mortgage term, your mortgage interest rate will drop too. However, if interest rates climb during your mortgage term, your mortgage rates will go up as well. This could make your mortgage unaffordable if you don’t have room in your budget for higher payments.
The majority of Canadian home buyers choose the stability of a fixed-rate mortgage. A fixed rate offers a stable interest rate throughout the mortgage term. If you choose an 8-year fixed rate mortgage today, you know the interest rate you’re getting for the full eight years of the contract. There won’t be any surprises.
On the other hand, that greater security comes at a cost. Fixed mortgage rates are typically higher than variable mortgage rates, and that includes historical 8-year fixed mortgage rates in Canada. Like an insurance policy, you pay a little more to have less risk with a fixed rate vs. a variable rate.
Open vs. closed mortgages
When considering what mortgage term is right for you, another important factor to consider is whether the eight-year fixed mortgage is “open” or “closed.”
An open mortgage allows you to prepay, renew or refinance without penalties. This is a great option if you know you want to move to a new house, pay off your mortgage or refinance before the eight-year mortgage term is up. Because open mortgages make it easier for you to pay off your loan faster, lenders typically charge higher interest rates for 8-year fixed open mortgage rates in Canada. Still, this can be worth it to avoid significant penalty fees if you want to make additional payments or pay off your mortgage early.
Closed mortgages are more common than open mortgages, because most homebuyers don’t plan to pay more than their standard mortgage payments each month. With a closed mortgage, you’re locked into a payment schedule and can’t make extra payments, pay off your loan early or refinance without incurring fees. In exchange for sticking to a rigid payment schedule, lenders will typically offer lower interest rates for an 8-year fixed closed mortgage in Canada compared to an open mortgage.
Finding the best 8-year fixed rate mortgage offers
Both the fixed interest rate and the longer-than-average mortgage term may appeal to a homebuyer who prizes stability and security in a loan product.
LowestRates.ca lets you compare mortgage products with the features you need, or search for the best rates among different mortgage types.