The 5-year fixed mortgage rates stand out as the most popular choice among homebuyers. This type of mortgage offers a set interest rate that remains constant throughout the term, providing stability and predictability in monthly payments.
What is a 5-year Fixed Mortgage Rate?
With a fixed-rate mortgage, your interest rate remains constant throughout the entire term. A five-year fixed mortgage is a home loan in which the interest rate remains unchanged for five years.
Your monthly mortgage payments will stay consistent during this period, regardless of market fluctuations. After the 5-year term ends, you can renew your mortgage at the current market rates or explore other options.
Current 5-Year Fixed Mortgage Rates in Canada
Let’s take a look at the current 5-year fixed mortgage rates offered by various lenders in Canada. As of February 2025, the best 5-year fixed mortgage rates in Canada are:
| Provider | Rate |
|---|---|
| Lowest in Canada | 3.89% |
| Big 6 Bank Average | 5.03% |
| TD Bank | 4.94% |
| RBC | 4.89% |
| CIBC | 4.49% |
| Scotiabank | 6.49% |
| Lendnwise | 4.59% |
| Equitable Bank | 4.29% |
| CMLS Financial | 4.99% |
| First National | 4.64% |
| Motusbank | 6.69% |
How do 5-year fixed rates compare to other mortgage terms?
5-year fixed rates typically offer lower interest rates than shorter terms like 1-year or 3-year fixed mortgages. However, longer terms, such as 10-year fixed mortgages, may have slightly higher rates due to the extended commitment period.
Historical 5-Year Fixed Mortgage Rates in Canada
Examining the historical trends of 5-year fixed mortgage rates can provide valuable insights into how these rates have fluctuated over time and help you understand the current rate environment.
5-year fixed rates over the past decade
Over the past ten years, 5-year fixed mortgage rates have experienced significant fluctuations. In the early 2010s, rates hovered around 4%. By the mid-2010s, they dipped to around 2.5% due to global economic conditions and domestic policy changes. More recently, rates have climbed back up, with the average 5-year fixed rate across major lenders currently standing at 6.26%.
Historical highs and lows for 5-year fixed rates
- Historical high: In the early 1980s, during a period of soaring inflation, the 5-year fixed rate reached over 20%.
- Historical low: In 2020, some lenders offered rates slightly below 2% in response to the global pandemic.
Looking at the historical highs and lows of 5-year fixed mortgage rates can put the current rates into perspective and help you understand the potential range of rates you may encounter.
What factors influence 5-year fixed mortgage rates?
2 key factors impact 5-year fixed mortgage rates:
- Bond yields and economic conditions: 5-year fixed mortgage rates generally follow the 5-year Canada Bond Yield pattern. When bond yields rise, lenders find it more expensive to fund mortgages, leading to higher mortgage rates.
- Lender competition and strategy: Lenders set their rates based on desired market share, competition, marketing strategy, and overall credit market conditions.
Why are 5-year fixed mortgages so popular in Canada?
The popularity of 5-year fixed mortgages in Canada can be attributed to 3 key factors that make them an attractive choice for many homebuyers.
- Stability: Fixed rates offer peace of mind, as homeowners can budget with certainty, knowing their payments won’t change for 5 years.
- Competitive rates: Lenders often offer attractive rates for this term due to its popularity.
- Balanced term length: 5 years provides a reasonable balance between stability and flexibility.
According to the 2024 CMHC Mortgage Consumer Survey, 69% of all mortgages contracted in 2024 were fixed-rate mortgages, up from 66% in 2023. Among various borrower categories, the popularity of 5-year fixed mortgages remains consistent:
| Borrower Category | Percentage with 5-Year Fixed Mortgage |
|---|---|
| First-time homebuyers | 71% |
| Repeat buyers | 75% |
| Renewers | 71% |
| Refinancers | 60% |
What are the Pros and Cons of 5-Year Fixed Rates?
Before deciding on a 5-year fixed mortgage, consider its advantages and disadvantages.
Benefits of 5-year fixed mortgages
5-year fixed mortgages offer 2 compelling benefits, making them an attractive choice for many homebuyers.
- Predictability and stability of payments: With a fixed rate, your monthly mortgage payments remain consistent for the 5-year term, making budgeting easier.
- Protection against rate increases: Locking at a fixed rate protects you from potential interest rate hikes during your term.
Drawbacks of 5-year fixed mortgages
While 5-year fixed mortgages have many advantages, be aware of the potential drawbacks before committing to this type of mortgage.
- Higher rates than variable mortgages: Fixed rates often come with a premium to guarantee your rate. Historically, variable rates have proven to be less expensive over time.
- Potential breakage penalties: If you need to break your mortgage before the end of the term, you could face significant penalties, especially with fixed-rate mortgages. The penalty is typically the greater of three months’ interest or the interest rate differential (IRD).
Is a 5-Year Fixed Mortgage Right for You?
Determining whether a 5-year fixed mortgage is the right choice depends on your circumstances, financial goals, and risk tolerance.
When does a 5-year fixed mortgage make sense?
A 5-year fixed mortgage may be suitable if you:
- Are risk-averse and value predictability in your monthly payments.
- Believe interest rates may rise in the near future and want to lock in a rate.
- Plan to stay in your home for at least the duration of the term.
When might a shorter or longer term be better?
Sometimes, a shorter or longer mortgage term may be more appropriate for your situation.
- Shorter terms (e.g., 1-3 years) may be preferable if you anticipate moving or refinancing soon, as they typically have lower breakage penalties.
- Longer terms (e.g., 10 years) may appeal to those who prioritize long-term stability and are less concerned about potential interest rate fluctuations.
Ultimately, the decision depends on your circumstances, financial goals, and risk tolerance.
Comparing 5-Year Fixed Rates Across Lenders
When comparing 5-year fixed mortgage offerings from various lenders, consider these features:
- Prepayment options: Look for lenders that allow you to make additional payments or increase your regular payment amount without penalty. This can help you pay off your mortgage faster and save on interest.
- Portability: If you plan to move before your term ends, a portable mortgage allows you to transfer your existing mortgage to a new property without incurring breakage fees.
- Payment frequency: Some lenders offer accelerated bi-weekly or weekly payment options, which can help you pay off your mortgage slightly faster than with monthly payments.
Insured vs. Uninsured 5-year fixed rates
Understanding the difference between insured and uninsured 5-year fixed rates can help you make an informed decision based on your down payment amount.
Insured mortgages, where the down payment is less than 20%, typically offer lower interest rates than uninsured mortgages. This is because mortgage default insurance protects the lender, reducing their risk.
Big Banks’ 5-year fixed mortgage rates compare to smaller lenders and brokers
When comparing 5-year fixed mortgage rates, compare offers from smaller lenders and mortgage brokers as well. These lenders may have more flexible criteria and potentially lower rates. Mortgage brokers can help you compare rates from multiple lenders to find the best deal for your situation.
Learn more about different mortgage rate terms in Canada
- Best 1-Year Fixed Rates
- Best 2-Year Fixed Rates
- Best 3-Year Fixed Rates
- Best 3-Year Variable Rates
- Best 5-Year Variable Rates
- Best 10-Year Fixed Rates
How to Manage Your 5-Year Fixed Mortgage?
Once you have a 5-year fixed mortgage, understand your options for effectively managing and paying off your mortgage.
What happens at the end of your 5-year term?
As your 5-year term comes to an end, you’ll have three options:
- Renew with your current lender: Your lender typically offers a renewal rate. Negotiate for the best possible rate.
- Switch lenders: If you find a better rate elsewhere, you can switch lenders at renewal time without incurring breakage fees.
- Refinance: If you have at least 20% equity in your home, you may be able to access that equity through refinancing.
How can you pay off your 5-year fixed mortgage faster?
If you want to pay off your 5-year fixed mortgage faster and save on interest, consider these strategies:
To accelerate your mortgage repayment, consider these strategies:
- Make prepayments: Use your lender’s prepayment privileges to make lump-sum payments or increase your regular payment amount.
- Choose an accelerated payment frequency: Accelerated bi-weekly or weekly payments can help you pay off your mortgage slightly faster than monthly payments.
- Shorten your amortization: If your budget allows, consider shortening your amortization period when you renew your mortgage. This will increase your monthly payments but help you become mortgage-free sooner.
Break your 5-year fixed mortgage
Breaking a 5-year fixed mortgage before the term is up can result in significant penalties, so borrowers should understand their options and the potential costs.
If you find yourself needing to break your 5-year fixed mortgage, take these steps:
- Understand the penalties: Contact your lender to estimate the breakage penalty. For fixed-rate mortgages, it’s typically the greater of three months’ interest or the IRD.
- Explore alternatives: If the penalty is substantial, consider alternatives like porting your mortgage to a new property or blending and extending your mortgage with your current lender.
- Crunch the numbers: Calculate whether breaking your mortgage and paying the penalty makes financial sense compared to your other options.
FAQs
Can I break my 5-year fixed mortgage early?
Yes, you can break your 5-year fixed mortgage early, but you will typically face a prepayment penalty. The penalty is usually the greater of three months' interest or the interest rate differential (IRD) between your current rate and the rate for a term similar to your remaining term.
How much can I save by choosing a 5-year fixed mortgage over a variable rate?
The potential savings of a 5-year fixed mortgage compared to a variable rate depend on market conditions and interest rate trends. Historically, variable rates have often been lower than fixed rates, but fixed rates offer stability and protection against rate increases. A financial professional can help you compare the costs and benefits of each option based on your situation.
Do 5-year fixed mortgage rates vary by province in Canada?
Yes, 5-year fixed mortgage rates can vary slightly by province in Canada due to differences in local economic conditions, competition among lenders, and provincial regulations. However, the differences are generally not significant, and national economic factors and lender policies more heavily influence rates.
Is a 5-year fixed mortgage a good choice for first-time homebuyers in Canada?
A 5-year fixed mortgage can be a good choice for first-time homebuyers in Canada who value predictability and stability in their monthly payments. It can help you budget more easily and protect you from interest rate increases during your term. However, you need to compare the costs and benefits of fixed and variable rates based on your specific financial situation and risk tolerance.
What factors should I consider when deciding between a 5-year fixed mortgage and a shorter or longer term in Canada?
When deciding between a 5-year fixed mortgage and a shorter or longer term in Canada, consider factors such as:
- Your plans for the property (e.g., how long you plan to live there)
- Your financial goals and expected changes in income or expenses
- Your risk tolerance and preference for payment predictability
- The potential costs of breaking your mortgage early
- The current interest rate environment and economic outlook
Can I get a 5-year fixed mortgage with bad credit in Canada?
Getting a 5-year fixed mortgage with bad credit in Canada may be challenging, as most prime lenders require a credit score of at least 600-660. However, some alternative or subprime lenders specialize in mortgages for borrowers with lower credit scores.
What happens if I sell my home before my 5-year fixed term ends?
If you sell your home before your 5-year fixed term is up, you have a few options:
- Port your mortgage: If it is portable, you can transfer it to your new property without penalty.
- Break your mortgage: You will typically face a prepayment penalty if you break your mortgage.
- Assume your mortgage: If your buyer assumes your mortgage, they take over your existing rate and terms, and you avoid penalty fees.
The Bottom Line
A 5-year fixed mortgage rate offers predictability, stability, and potentially competitive rates, making it a popular choice among Canadian homebuyers. However, it’s essential to consider your personal financial situation, risk tolerance, and long-term goals when deciding if a 5-year fixed mortgage is right for you.
By shopping around, comparing offers from multiple lenders, and working with a mortgage professional, you can find the best 5-year fixed mortgage rate and terms for your needs. Remember to read the fine print, understand the penalties for breaking your mortgage, and explore strategies to pay off your mortgage faster.
