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5-year fixed-rate mortgages in Canada: What you need to know.

The mortgage type most favoured by Canadians is the 5-year fixed-rate mortgage. Five years is long enough to provide a sense of stability while also allowing room for Canadians who want to take advantage of shifting interest rates.

Keep reading to learn more about how to qualify for the lowest rates on 5-year fixed mortgages.

If you’re ready to compare 5-year fixed mortgage rates right now, choose one of the options above. If you’re renewing, refinancing, or are a first-time homebuyer, LowestRates.ca can help you find a cheaper rate.

We compare mortgage rates from Canada’s preeminent banks and brokers. Our rates are updated throughout the day, so you know you’ll always see the most current 5-year fixed mortgage rates.

Your questions about five-year fixed-rate mortgages, answered.

What is a 5-year fixed-rate mortgage?

To explain what a 5-year fixed-rate mortgage is, let’s break down the concept into component parts.

Five-year

This refers to the length of the mortgage term. A mortgage term is the length of time your mortgage contract is in effect. The mortgage contract stipulates how much interest you’ll pay on the loan, how often you’ll make payments, as well as how much you’ll be borrowing.

The most popular term length for a mortgage in Canada is five years. There are more terms you can choose from:

  • Short term: less than four years.
  • Long term: over four years (up to 10 years).

You’ll likely need many terms to pay off your mortgage. At the end of your mortgage term, you’ll have the option to renew the contract or renegotiate it.

Fixed-rate

This refers to how your lender will calculate interest on your mortgage loan. There are two ways lenders can calculate interest. They can be fixed or variable.

  • Interest rates on fixed-rate mortgages stay the same for the entire term. Interest rates are usually higher than the rates for variable rate mortgages (see below).
  • Interest rates on variable rate mortgages will fluctuate with the bank’s benchmark lending rate. Interest rates tend to be lower initially than with fixed-rate mortgages, so you’ll want to consider whether you’ll be able to afford your payments if interest rates increase.

Putting it all together

When you sign on a five-year fixed-rate mortgage, you have entered a contract that’s valid for five years and you will have equal payments for the duration of your mortgage term.

Bonus: more terms you’ll encounter

There are other terms to know which refer to how much you can pay each month.

  • Closed mortgages have limits on the amount of extra money you can put toward your monthly mortgage payment. Interest rates on closed mortgages tend to be lower than on open mortgages (see below). Lenders depend on the stream of revenue you provide; paying off your mortgage sooner than scheduled can affect their finances. In Canada, a 5-year fixed-rate closed mortgage means you will be locked into the mortgage for five years, your payments will stay the same, and you will not have any prepayment privileges.
  • Open mortgages allow you to make larger monthly mortgage payments if you have the means to, without penalty. Since this could result in you paying off your mortgage sooner, lenders usually charge higher interest on open mortgages. A 5-year fixed-rate open mortgage in Canada means you would be locked into the mortgage contract for five years and you do have the ability to make additional payments towards your mortgage loan.

On LowestRates.ca, you can customize your mortgage term, whether it’s variable or fixed payments, and if you want it to be open or closed. See what the major Canadian banks offer on 5-year fixed mortgages by comparing rates today.

What’s the difference between a bank and a broker?

There are a few ways to get a mortgage in Canada. Most people’s first instinct is to go to a brick-and-mortar bank, but that might not always be the right choice.

Pros of a bank mortgage

  • Consolidating all your financial products with one provider is less hassle. Bills are easier to manage because your payments are only going to one entity.
  • There’s an element of trust. If you’ve been happy with the service you’ve received in the past, you might be more comfortable with getting a mortgage from an institution you’re familiar with.

Cons of a bank mortgage

  • Banks can only offer their own products. You don’t have much selection.
  • It’s harder to qualify for a bank mortgage. If you’re self-employed, you may have difficulty getting a mortgage from one.
  • Banks rarely offer the lowest mortgage rates.

The other option is to get a mortgage from a mortgage broker.

Pros of a mortgage broker

  • Mortgage brokers can present mortgage options from a variety of lenders, including brand-name banks.
  • Mortgage brokers offer discounted rates to consumers. They bring in business to mortgage lenders and receive volume discounts as a result.

Cons of a mortgage broker

  • Lack of brand-name familiarity.
  • Some lenders don’t work with mortgage brokers. That means they can’t compare the whole market for you

So, which route should you choose? Take time to consider things like who has the better rate, and the flexibility of the mortgage they're offering. LowestRates.ca can save you time and money by comparing the best banks and brokers for you.

What is the average interest rate on a 5-year fixed-rate mortgage in Canada?

When choosing a mortgage, it is important to look back at how mortgage rates have behaved in the recent past in order to model the future. That said, the past is not indicative of the future. When buying a home, you need to be prepared for the possibility that mortgage rates will change — but past rates can be useful when evaluating 5-year-fixed-rate mortgages currently on offer.

On LowestRates.ca, we track historical 5-year fixed mortgage rates in Canada. Here's how mortgage rates on our site have performed compared to the Bank of Canada’s benchmark rates.

To find today’s rates on 5-year fixed-rate mortgages, click the pink button at the top of the page — we update our rates throughout the day, every day.

MonthOur average variable rateOur average fixed rate
02/193.30%5.34%
03/193.15%5.34%
04/192.94%5.34%
05/192.78%5.34%
06/192.63%5.34%
07/192.53%5.19%
08/192.39%5.19%
09/192.39%5.19%
10/192.49%5.19%
11/192.36%5.19%
12/192.46%5.19%
01/202.62%5.19%

What are the fees involved with a 5-year fixed-rate mortgage?

Looking for the cheapest 5-year fixed-rate mortgage with no fees? We’re sorry to say that a 5-year fixed-rate mortgage with no fees doesn’t exist: all mortgage loans come with fees. However, we can help find the lowest possible rate you qualify for, which will help you save money. Comparing mortgage rates is essential to finding the best rate.

As for fees, we’ve outlined the main mortgage closing costs you need to know about.

  • Mortgage broker fees: If you use a mortgage broker to source your mortgage, you will have to pay the broker a finder’s fee. If you are a subprime borrower (you have a low credit score or need a high ratio mortgage), you may even be asked to pay another fee upfront. This ensures the broker is compensated even if you're denied a mortgage. 
  • Default Mortgage Insurance: In Canada, if your down payment is less than 20% of the home’s sale value, you need to buy insurance for your mortgage. The Canadian Mortgage Housing Corporation provides the insurance. The premiums are rolled into your mortgage payments. The insurance protects your lender in case you, the borrower, default on your mortgage.
  • Provincial Sales Tax (PST): In some provinces, you have to pay Provincial Sales Tax (PST) on your mortgage. It’s added to the mortgage balance and has to be paid at closing.
  • Interest adjustment costs: If you close on a house mid-month, your lender may charge you for the interest accrued before you pay your first full mortgage payment.
  • Appraisal fee: Your lender will hire an independent appraiser to judge whether your prospective home meets its lending criteria. You are responsible for paying for the appraisal.
  • Prepayment penalty: If you’ve chosen a closed mortgage, you will be charged a fee for making extra payments. If you want to be able to make larger payments from time to time, you can do so without cost by choosing an open mortgage.

These are only the fees associated with your loan; there are a bunch of other fees associated with closing on a home, including legal and insurance costs as well as property taxes.

What other mortgage terms are available?

The mortgage term defines how long you’ll be locked into your mortgage contract. The contract stipulates how interest will be calculated and whether you will have any prepayment privileges. After the term ends, you will be able to renegotiate your mortgage contract (also called renewal). It takes many terms to pay off a mortgage in full.

Five-year fixed-rate mortgages are the most popular term length for mortgages in Canada. Five years isn't too long nor is it too short; it lends a feeling of stability to many Canadian homeowners. But there are reasons why you might want to consider a mortgage term of a different length.

There are short term and long term mortgages. Anything below four years is considered a short term mortgage and anything beyond that is a long term mortgage. The shortest mortgage term is six months and the longest is 10 years.

Interest rates tend to be lower on short-term mortgages — that’s because lenders can bank on getting their money back relatively soon; they are taking on less risk — but monthly payments on short-term mortgages tend to be quite steep.

A long term mortgage can provide peace of mind, but you do sacrifice flexibility. If you end up wanting out of your mortgage to seek a lower interest rate through refinancing, it will come at the cost of hefty fees.

What is the difference between a 2-year vs 5-year fixed-rate mortgage?

  • Mortgage rates for a 2-year mortgage will be lower than the 5-year mortgage.
  • The contract will end after 2 years.
  • A good choice if you don’t expect to have a mortgage for longer than two years.

What is the difference between a 3 or 5 year fixed rate mortgage?

  • Mortgage rates for a 3-year mortgage will be lower than the 5-year mortgage, but higher than a 2-year mortgage.
  • The contract will end after 3 years.
  • A good choice if you don’t expect to have a mortgage for longer than 3 years.

Where can I get the cheapest rate on a 5-year fixed-rate mortgage in Canada?

The answer will be different for everyone. We can’t recommend one Canadian bank over the other for their 5-year fixed-rate mortgage deals. It's not about where you go, but how desirable of a borrower you are from the lender’s perspective.

To secure the lowest possible 5 year fixed mortgage rates, make sure you are in good standing in the following areas:

  • Your Total Debt Service and Gross Debt Service ratios are 32% and 40% or under, respectively.
  • You pass the mortgage stress test.
  • You have a high credit score.
  • You have a decent down payment.
  • You have a stable income.

If you meet or exceed these criteria, you will have more options for mortgage lenders. If you are lacking in any of these areas, you may have to go to a B lender, which will charge slightly higher interest rates.

What is the lowest 5-year fixed mortgage rate? For the reasons we’ve stated above, the answer will be unique to everyone. Compare rates from banks and brokers to find the best 5-year fixed mortgage rates in Canada that suit your individual financial goals.

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