Best 5-Year Fixed Mortgage Rates In Canada

Current 5-year mortgage interest rates in Canada

Rates updated: February 23, 2023

Based on average weekly conventional mortgage interest rates posted by the major chartered banks. Data source: Bank of Canada

Best 5-year rates from Big 6 banks in Canada

Rates updated: February 23, 2023

Posted rates for closed mortgages with amortization under 25 years. Data source: Canada’s big six banks

Canada’s current 5-year mortgage rate trend

Best 5-year fixed mortgage rates in Canada

Guide to comparing 5-year fixed mortgage rates in Canada

The mortgage rates displayed on this page are provided to NerdWallet by Homewise, a licensed mortgage broker that partners with lenders across Canada.

These mortgage rates are refreshed daily, representing the latest 5-year fixed mortgage options available from Homewise’s lender partners. The rates come directly from Homewise’s lender partners and are updated by Homewise to provide the most accurate options for you each day.

What’s a good 5-year fixed mortgage rate?

The short answer: A good 5-year fixed mortgage rate is the lowest rate you can qualify for based on the amount you need to borrow and the specific loan features that best fit your finances.

The longer answer to this question requires some historical context. According to the Bank of Canada, the average 5-year mortgage rate offered by Canada’s major chartered banks was:

• 6.49% on October 19, 2022.
• 5.24% on October 17, 2012.
• 6.7% on October 16, 2002.
• 9.25% on October 21, 1992.
• 16% on October 20, 1982

It’s widely expected that five-year fixed mortgage interest rates will continue increasing throughout 2022, creating challenges for home buyers through much of 2023.

But by looking back over the past few decades, you can see that mortgage rates are still quite low by historical standards. And that while 6.49% in 2022 might feel high, it’s still a “good” rate compared to what Canadians were paying in the 1980s or 1990s.

A lender’s advertised mortgage rate is only the beginning of the story, anyway. The actual mortgage rate you’re offered will be determined by your credit score and other personal financial factors.

Why it’s important to compare 5-year fixed mortgage rates before applying

A mortgage is the biggest loan most Canadians will ever take out in their lives. Keeping monthly mortgage payments manageable is key to living comfortably with such a large debt. The rate of interest charged to finance a home purchase, also called the mortgage rate, has a huge impact on the total cost of your loan.

Getting the lowest rate possible will save you money. That being said, rates shouldn’t be the only determining factor when comparing lenders; penalty costs, portability and overall customer service are also key considerations.

Doing thorough research, understanding your mortgage objectives and comparing options side by side should help you find a competitive rate with a mortgage lender that will meet your needs.

How to choose the best 5-year fixed mortgage rates among lenders

Comparing mortgage rates between lenders can be more complex than it might appear.

It’s crucial to compare annual percentage rates (APRs) and not just interest rates. The interest rate is a set percentage that a lender charges you to borrow money; APR includes the interest rate, fees and other closing costs that are set by the lender.

Ideally, lenders will publish APRs in addition to interest rates. If they don’t, APR can be calculated this way:

• First, divide total fees by the total loan amount.
• Then, multiply the result by the number of days in the year.
• Next, divide that result by the total number of days in the loan’s term.
• Finally, multiply that result by 100 and add a % sign.

Looking at the APR will give you a more accurate idea of the true cost of your mortgage. Here’s an example:

• Lender A: Offers a 5-year fixed mortgage with a 3% interest rate and 3.25% APR.
• Lender B: Offers a 5-year fixed mortgage with a 3% interest rate and 3.175% APR.

If you only compared the above mortgage offers based on interest rate, you’d find no difference. But by examining APR, you can see that Lender B is charging lower fees, meaning the second mortgage offer is the better deal.

When looking at mortgage rates, take care to compare identical mortgage products, terms and amortization periods. Other important considerations when comparing mortgage rates across lenders include fees (like home appraisal fees), prepayment penalties, portability, the ease of the application process and a lender’s customer service ratings. You should also look at mortgages offered by both well-known, institutional lenders and smaller, alternative lenders.

How is your 5-year fixed mortgage rate determined?

Fixed mortgage rates are determined by different factors, including activity in the bond market and several considerations that are wholly dependent on each applicant’s unique personal and financial circumstances, such as the mortgage term and amortization period chosen, the down payment amount, credit score and income.

The bond market

Government bonds are considered very stable investments, which is why financial institutions invest in them to create a reliable profit flow. When interest rates rise, however, bond values decrease and therefore the banks lose money. To offset this loss, banks will then raise the interest rates on fixed-rate mortgages.

A simple way of thinking about it is that when the yield (the actual rate of return during a bond’s term) on 5-year government bonds trends up or down, 5-year fixed mortgage rates tend to follow suit.

The mortgage term and amortization you choose

The term is the length of time your mortgage contract is valid. In Canada, mortgage terms can run anywhere from six months to 10 years. The most popular mortgage term, according to Statistics Canada, is a five-year fixed-rate mortgage, which accounted for 49% of Canadian mortgages in 2020.

The popularity of the 5-year fixed term may be because many people, like financial institutions, enjoy having a predictable payment schedule without feeling that they are locked into a contract for an uncomfortably long period of time.

Amortization period

Don’t confuse your mortgage’s term with its amortization period, which is the length of time it will take you to pay off your mortgage in its entirety.

The most common amortization period in Canada is 25 years. In fact, if your down payment is less than 20% of a home’s value, you’re not allowed to exceed an amortization of 25 years. If you can provide a down payment greater than 20% then you can have an amortization period of up to 35 years.

Some borrowers opt for the shortest amortization period possible, because it means paying less interest overall and potentially saving thousands of dollars.

Here are some other types of mortgage contract terms to be aware of:

• Short-term mortgage. Terms of five years or less. With a short-term mortgage you can choose between a variable or fixed rate. In general, the shorter the term, the lower the interest rate, but for many Canadians looking to avoid the vagaries of the economy, financial peace of mind may be worth the extra expense of locking your mortgage in for a longer period of time.
• Long-term mortgage. Terms of more than five years. Longer term mortgages tend to be fixed rate only and feature substantial prepayment penalties if you break the contract in the first five years.
• Open mortgage. An open mortgage is the most flexible type of mortgage because it allows prepayment of the loan without any penalty charges, potentially saving you a lot of money on interest. However, you pay for this flexibility with higher interest rates than you get with a closed mortgage, so if you don’t end up paying off the mortgage early, you would actually lose money.
• Closed mortgage. In exchange for a lower interest rate, a closed mortgage locks you into a mortgage contract for a set period of years. If you want to pay off the mortgage early, you’re charged a significant prepayment penalty.
• Mortgage insurance. If you have a down payment of less than 20% of the value of a property, it’s considered to be a high-ratio mortgage and you’ll need mortgage default insurance. The insurance protects lenders in case a borrower defaults on their mortgage. Mortgage default insurance premiums tend to range from 0.60% to 4.50% of your mortgage amount.

What happens at the end of your 5-year mortgage term?

As the five year mark approaches, you’ll have several options: renew, refinance or replace.

If you elect to renew your mortgage, your lender will send you a renewal statement that contains details of your renewed contract, such as the term and interest rate. If all looks good, you simply sign the document and your mortgage will continue on seamlessly.

But if you’re not entirely happy with the new mortgage contract — maybe you want a lower interest rate or a shorter amortization period — you could try to refinance your agreement to get more favourable terms.

You also have the option of comparing current mortgage rates and going with a new lender. While you might get a better rate with a new lender, keep in mind that there may be additional costs, such as setup and appraisal fees.

Mortgage prepayment penalties

Prepayment penalties are fees that may be incurred if you pay off all or part of your mortgage before the end of its term. Prepayment penalties are an important consideration when deciding what kind of mortgage to choose as they could end up costing you tens of thousands of dollars.

How prepayment penalties are calculated depends on your specific lender and mortgage contract. For fixed-rate mortgages, the penalty charge is usually the higher of:

• Three months’ interest on the prepayment amount, or
• The interest on the prepaid amount for the remainder of the term, which is calculated using an interest rate differential (IRD). The interest rate differential can vary by lender but is often calculated as the difference between your current mortgage rate and the rate currently posted by the financial institution.

Your down payment amount

In Canada, if a home costs $500,000 or less, the minimum down payment is 5% of the purchase price.

For homes valued at over $500,000, the minimum down payment is 5% on the first $500,000 and 10% on the remaining balance. For homes worth $1 million or more, the minimum down payment is 20%.

If you wanted to buy a home valued at $850,000, for example, you’d need to pay $25,000 on the first $500,000 (5% of $500,000 = $25,000) and $35,000 on the remainder (10% of $350,000 = $35,000) for a total down payment of $60,000.

The amount of your down payment greatly influences the overall size of the loan you need and the type of mortgage you can get.

If your down payment is less than 20% of the home’s value, you’ll need what’s known as a high-ratio mortgage. As such, you’ll be required to pay for mortgage default insurance, which will add an additional charge of up to 4.5% of your mortgage amount to the cost of buying a home.

A larger down payment also means that you’ll start off with more home equity, which increases your net worth and makes it easier to qualify for home equity lines of credit with favourable rates. Access to a HELOC can come in very handy if you need to do renovations.

A larger down payment also means that you won’t need to finance as much of the home’s price, saving you thousands of dollars in interest over the course of the mortgage.

Your credit score and income

For the best mortgage rates, financial institutions are likely to require a credit score of at least 680, though you have a good chance of being considered for a mortgage with a minimum credit score of 600.

For home buyers who put down less than a 20% down payment, and are thus required to purchase default insurance, the official minimum credit score required for a mortgage with default insurance is 600.

The good news is that the Canadian Mortgage and Housing Corporation clearly states that only one borrower needs a score of at least 600, meaning that, if you’re applying with a co-borrower, it’s possible for one applicant to have a lower score.

What’s a “good” credit score?

Credit scores in Canada range from 300 (poor) up to 900 (excellent). Any number from 660 and up is considered a good score and is likely to get you approved for a mortgage, though each lender may have their own unique requirements.

What to know about credit scores if you’re new to Canada

To be considered creditworthy by potential lenders, you’ll want to aim for a credit score of at least 660. If you’re new to the country, your previous credit score is unlikely to come with you. This means you may have to build your score from scratch so it may take time to build sufficient credit for a large loan like a mortgage.

While much of the work building a solid score is simply a matter of responsible fiscal management and patience, there are things you can do to start credit building, such as applying for a secured credit card and always paying your bills on time.

» MORE: How to get a better credit score

The mortgage stress test

No matter your credit score, you’ll have to pass Canada’s mortgage stress test to get a mortgage from a federally regulated financial institution.

The test, which even applies to borrowers who can put together a down payment of 20% or more, is designed to ensure that you’ll be able to make your mortgage payments if there’s a rise in interest rates.

To pass the test you need to show that you can make your mortgage payments at the “minimum qualifying rate.” As of June 1, 2021, the minimum qualifying rate is the higher of the benchmark rate of 5.25% or the mortgage rate offered by the lender plus 2%.

How to qualify for the lowest possible mortgage rate

Though lenders may have different mortgage qualification criteria, some reliable ways to qualify for the lowest mortgage rates available include:

A strong credit score

The best mortgage rates generally go to creditworthy borrowers, meaning those with a solid credit score of 680 and higher. Lenders perceive borrowers with high credit scores as lower risk. 

You’re still likely to be considered for a mortgage with a score of 600 and above, you just may not necessarily be offered the best rates.

Manageable debt service ratios

Lenders will take a careful look at two key ratios when deciding whether or not to give someone a mortgage with the best rates: Gross Debt Service (GDS) and Total Debt Service (TDS) ratios.

Your GDS ratio is what percent of your pre-tax household income goes towards housing costs like your mortgage payments, utilities and property taxes. It should not exceed 32% of your yearly gross income.

Your TDS ratio includes your GDS, as well as any other debts you are carrying (like student loans and credit card debt). Your TDS ratio should not be more than 44% of your pre-tax household income. The lower your ratios are, the better chance you have of getting the most favourable mortgage rates.

Fixed rates vs. variable rates

Fixed rate mortgages tend to have higher interest rates than variable mortgages. For the added cost, borrowers receive the certainty of knowing how much their mortgage payments will be for the entirety of their term. 

» MORE: How to choose between fixed and variable-rate mortgages

Is the lowest mortgage rate the best mortgage rate?

It may seem counterintuitive, but the “best” mortgage isn’t necessarily the one that offers the lowest annual percentage rate — though that’s a good place to start.

Other factors worth comparing when looking at mortgage rates include fees, the terms and conditions of your mortgage contract, ease of online access and customer service. In some cases, lenders will make up for low mortgage rates by charging higher fees, so it’s important to evaluate all of these factors.

Use mortgage rates to estimate your mortgage payment

Getting a current rate quote is essential if you want an accurate estimate of what your monthly mortgage payment might be.

For example, compare how your borrowing power and total costs might change with a 3% versus a 4% interest rate for a five-year, fixed rate $500,000 mortgage that’s amortized over 25 years.

With an interest rate of 4% you’d have paid off the $500,000.00 principal and $289,030.31 in interest, for a total payment of $789,030.31 over 25 years.

With a rate of 3% you’d still pay off the $500,000.00 principal, but you’d pay $209,868.25 in interest, for a total cost of $709,868.25 over 25 years.

That 1% difference in interest rate could end up saving you $79,162.06 over the course of your amortization period. A handy way to accurately compare costs without doing a lot of math is by using an online mortgage payment calculator.

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Porting a mortgage applies an existing mortgage contract to a new home purchase. Porting can be less expensive than breaking a mortgage.

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