Best 10-Year Fixed-Rate Mortgages In Canada For May 2024

Based on a collection of 11 lenders throughout Canada, the current average 10-year fixed mortgage rate is 6.98%.

Fixed-rate mortgages come with an array of benefits, both economic and not.

Many consumers that lock-in their interest rate on their mortgage have additional peace of mind compared to borrowers that carry the risk of their interest rate climbing and falling over time. Fixed-rate mortgages allow borrowers to have a concrete idea, for the next number of years, as to how much their mortgage payments will be each month. Fixed-rate mortgages are the most common mortgages in Canada.

In terms of economic benefits, should consumers lock-in their rates at a time when interest rates are low—such as during the pandemic before rates starting rising in March 2022—they could save money when interest rates cycle upward.

Generally speaking, the longer the term of your mortgage, the higher your interest rate will be. Currently, a 5-year fixed rate mortgage sits with an interest rate around 6.04%. In contrast, the average 10-year fixed rate is nearly 7%. There is a cost that comes with the convenience of knowing exactly what your monthly payments will be.

If interest rates decline during the term of your agreement, you will miss out on potential savings during those periods. Ten years is the longest possible mortgage term in Canada, it is critical you have an eye on where interest rates are heading before locking in your mortgage rate for such a long period of time.

Deciding on a term length for your mortgage is no small matter, and it is important to take into account all aspects of your financial goals—not just those related to homeownership.

First-time homebuyers, or those looking to own a home for a shorter period of time, might be better suited for shorter-term mortgages, like one to three years.

On the other hand, homebuyers looking to settle in for the long haul and are not wanting to adjust their interest rates for a number of years, may be better off with a long-term mortgage of five to 10 years.

It is also important to note your risk tolerance and organizational disposition when choosing a term length. Would you prefer to have a well-thought out financial plan for the next few years, or see where your mortgage lands in a couple years? Also, you should ask yourself whether you have a higher tolerance for the financial risk associated with fluctuations in the market?

Questions like these will help you decide on a mortgage term that is both right for your financial situation and your overall temperament.

The cost of a fixed-rate mortgage depends on a variety of factors such as the current interest rate, the term length of the mortgage and the initial down payment.

Typically, the longer your mortgage term, the higher your rate will be because banks tend to forecast that interest rates will generally decline over the long-term. After all, high interest economic environments are typically never expected to last longer than a year or two at most. Of course, there are always exceptions to every rule.

Due to interest rates sitting at record highs, interest rates for fixed-mortgages have partially inverted or “flipped”—short term mortgages of one to two years have higher rates than 10-year mortgages. Three to 5-year mortgages rates are lower than both, however.

If you are renewing your mortgage rather than purchasing a new property, your mortgage rate is also determined by the amount of equity in your home.

If you purchased a home worth $500,000 and have put down $250,000 toward its principal value, your debt-to-equity ratio is 50%—rather than 80% if you were purchasing a new home with a 20% down payment. A lower debt-to-equity ratio generally means that lenders will view you as less of a risk and may give you a lower mortgage rate as a result.

When it comes time to seek approval , the lender will look at a variety of factors to determine your eligibility. Lenders will examine your income, credit score, down payment savings or equity and any debts/liabilities you may have.

Of these factors, a solid personal credit score is arguably the most important to a successful application. Since a prospective mortgage lender is determining whether or not to lend you money based on your past history of paying back creditors, having a poor credit score could peg you as a borrowing risk.

However, even if your credit score is not as high as you might like, note that lenders will look at all the above factors when deciding on your application. If you have an unusually high down payment with a lower than average credit score, those two factors could balance one another out in the eyes of a lender.

Related: How To Get A Mortgage in Canada

Though with a fixed-rate mortgage your monthly payments are determined by the amount of your down payment, there are a number of additional fees that may apply when you acquire a new mortgage or renew an existing one.

Between legal fees, land taxes, home inspection or appraisal fees, real estate fees and any administrative fees, borrowers generally need to be prepared to pay an additional 3% to 4% of the original purchase price at closing.

Borrowers also need to be aware of prepayment penalty fees they will incur when paying off their mortgage early or if they break their contract and switch to another lender before their term ends and the contract expires.

Though the name may suggest otherwise, fixed-rate mortgages do offer some flexibility—just not on their interest rates.

Many lenders offer prepayment privileges on fixed-term mortgages, meaning that the borrower is able to make extra payments toward their mortgage up to a predetermined annual percentage without paying a penalty. Though each lender will have a specific amount you can pay in addition to your monthly rate, the average prepayment privilege percentage is anywhere from 10% to 20% higher than your annual amount still owed.

Current interest rates, your financial and family situation or how satisfied you are with your current mortgage contract, are all factors worth considering when choosing to end your mortgage term early.

Breaking a fixed-rate mortgage before the renewal date comes with a prepayment penalty. Typically, this amount can average a few thousand dollars—depending on the lender. You will also be required to pay additional administrative, appraisal and reinvestment fees, as well as a mortgage discharge fee.

If you are breaking out of your contract for a lower rate, you will want to ensure that the money you save will cover—and ideally exceed—the costs you incur for breaking the contract in the first place.

Prepayment penalties are calculated based on two formulas, with the highest result determining the final cost:

1. A flat fee based on three months’ interest on your current mortgage amount; or

2. The interest rate differential (IRD)

An IRD is usually calculated by using two interest rates—the contract rate, as described in your contract, and the posted interest rate currently available for a mortgage with a similar term—and then applying them to the balance remaining for your current term. The difference between these two amounts is the IRD.

Breaking a fixed-rate mortgage is no small decision. While crunching the numbers on your own is a good choice, consulting with an independent mortgage broker to iron out the details is likely the best course of action.

Once your mortgage term ends, if you still have a balance owing on your mortgage you will be required to renew your mortgage agreement with your current lender or a new one of your choosing. Since the end of a mortgage term signals the beginning of a new contract, the terms of your renewal are negotiable, which allows you to potentially lock in a better interest rate or adjust the length of your next mortgage term moving forward. You can also change your rate from fixed to variable if you want.