Best 5-Year Fixed-Rate Mortgages In Canada For May 2024

We reviewed 100 mortgage lenders that do business both online and in-person throughout Canada. The lenders we reviewed represent some of the largest mortgage lenders by volume, which includes banks, credit unions and online lenders. Lenders that didn’t provide their mortgage rates or operate in fewer than four provinces or territories were not eligible for review.

Our rates were generated through publicly available posted rates on the lender’s website, but also through the following borrower profiles that we presented to the lender anonymously by phone or online:

Profile 1

• Property Type: Single-Family Home
• Property Usage: Primary Residence
• Purchase Price: $790,000
• Down Payment: 20% ($158,000)
• Credit Score: 700-719
• Postal Code: N2L 1V6 (Waterloo, Ontario)

Profile 2

• Property Type: Single-Family Home
• Property Usage: Primary Residence
• Purchase Price: $1,300,000
• Down Payment: 20% ($260,000)
• Credit Score: 700-719
• Postal Code: V6A 2W5 (Vancouver, British Columbia)

Profile 3

• Property Type: Single-Family Home
• Property Usage: Primary Residence
• Purchase Price: $300,000 ($60,000)
• Down Payment: 20%
• Credit Score: 700-719
• Postal Code: S4P 3C8 (Regina, Saskatchewan)

Profile 4

• Property Type: Single-Family Home
• Property Usage: Primary Residence
• Purchase Price: $440,000 ($88,000)
• Down Payment: 20%
• Credit Score: 700-719
• Postal Code: B3S 0J1 (Halifax, Nova Scotia)

Our scores out of five are based on the following factors:

• Rate – 75%
• Timeliness – 5%
• Prepayment privileges – 5%
• Penalty calculation type – 10%
• Availability of discount rates – 5%

Please do not take the rates posted here as gospel. They are intended to only offer a ballpark and sample of the rate a lender may offer for that particular mortgage term. That does not mean that you will qualify for the above rates or that they haven’t changed those rates since publication. Please consult a mortgage lender or broker to get the best rate possible for your particular property-buying circumstance and financial situation.

A conventional mortgage is one with a down payment of at least 20%. That means you usually don’t need to pay premiums on mortgage default insurance. If your down payment is less than 20%, it’s a high-ratio mortgage and you must get mortgage default insurance.

A fixed-rate mortgage has a rate that doesn’t change and the payment amount stays the same for the entire term.

A five-year fixed-rate mortgage is a mortgage where the borrower pays a fixed and unchanging interest rate on the loan for a mortgage contract length (known as a term) of five years.

Once that term expires, the borrower can choose to renew their mortgage with the same lender for the same or a different term length and try to renegotiate a better interest rate than they were offered for the duration of the previous mortgage term. The borrower may also sign a mortgage contract with a different lender for the same or different term length and a better interest rate, once the previous mortgage term expires. If the borrower tries to break their mortgage contract before the expiration of their mortgage term, they can do so but they will be subject to a financial penalty.

How are Canadian 5-Year Fixed Mortgage Rates Determined?

Canadian five-year fixed mortgage rates are determined mainly by two things, the bond market and the borrower’s personal financial situation. Since government bonds are some of the most secure financial instruments to borrow money against because they are backed by the government, banks invest in them to keep their profits stable. Therefore, when the price of bonds decreases, banks lose money. As a response, you’ll often see them raise interest rates on fixed-rate mortgages in particular.

Bonds going down in price may influence fixed mortgage rates in general, but the actual rate a borrower is offered depends on personal financial factors like their credit score, the down payment amount they were able to put on the home they purchased and their debt-to-income ratio.

If their credit score is high, their down payment is 20% or more and their debt to income ratio is low, the borrower will likely receive a pretty good interest rate on their 5-year fixed rate mortgage.

Is a 5-Year Fixed-Rate Mortgage Right for You?

A five-year fixed rate mortgage is right for you if you are looking for stability in how much your mortgage will cost from month to month for a period of five years. They are beneficial in high interest rate environments if you can lock in a lower rate before interest rates are expected to go up. You can also expect fixed mortgage rates of all terms to be lower than variable rates in high interest environments.

That being said, if interest rates drop lower than the interest rate you received on your fixed-rate mortgage and you still in the middle of your five-year term, you will not be able to take advantage of the lower interest rate and save money until your five-year term expires and by then, interest rates may have gone up again.

Pros and Cons of a 5-Year Fixed-Rate Mortgage

Like most things in life, five-year fixed-rate mortgages have their advantages and drawbacks:

Pros

• Expected cost for a stated period of time. You’ll always know what interest rate you will pay over the life of the term and your monthly cost will stay consistent.
• Straightforward. How five-year fixed-rate mortgages work is relatively straightforward and easy to understand.
• Widely available. Most lenders offer five-year fixed-rate mortgages, so it’s easy to shop around and find a better rate when your term expires.

Cons

• Missing out on a drop in interest rate. You won’t be able to take advantage of a lower interest rate until your five-year term expires.
• Prepayment penalties. If you try to break your mortgage before the five-year term expires or if you pay more than your monthly mortgage payment, you’ll be subject to expensive prepayment penalties.
• Lack of flexibility. Life circumstances are not anything we can predict, especially five years from now, so you may have no choice but to break your mortgage contract in the middle of your term, which will be expensive, but might be necessary.

There are a number of factors to consider when choosing the best five-year fixed-rate mortgage for your needs:

Amortization Length

This is the amount of time it will take to pay off your property in full. While your term at a fixed or variable interest rate may expire, your amortization period stays the same for as long as you are paying off the balance of your mortgage. Most amortization periods in Canada go up to 25 years. It’s possible to get a 30-year amortization period, but those mortgages must be uninsured so they need a down payment of 20% or over. If you select a shorter amortization period, you will pay less interest over the life of your mortgage, but your monthly payments will be higher.

Fees

There are fees that are typical, such as appraisal fees for mortgage renewals, but some private lenders may charge various fees in exchange for the chance at a lower mortgage rate. These fees can certainly increase your costs, so it’s important to talk to your lender and mortgage broker about just what fees you’ll be paying and how much they will be before signing your mortgage contract.

Prepayment Penalties

Prepayment penalties are an expensive cost you will have to pay if you break your mortgage contract with your lender before the expiration of your term or if you pay more than your annual mortgage payment without having prepayment privileges or paid over the allowable prepayment privileges percentage.

Prepayment penalties are calculated either as three months’ interest on the prepayment amount or the interest on the prepayment amount for the remainder of your current term (whichever is higher). The interest on the second option is typically calculated using the interest rate differential, which is usually the difference between the interest rate in your mortgage contract and the posted interest rate for your type of mortgage at the time you’re assessed the penalty.

Portability

Portability is when a lender allows you to transfer your mortgage contract from your old home to your new home without paying a penalty. If your new home amount is less than your old one you will get to keep your current mortgage interest rate. If the cost of your new home is more than your old one, your lender will likely offer a blended interest rate, which combines your old rate with the current one.

Open vs. Closed Mortgages

Five-year fixed-rate mortgages, and all fixed-rate mortgages, are generally considered closed mortgages. This means that paying more than your monthly payment is usually akin to breaking your mortgage contract and will subject you to prepayment penalties unless your mortgage comes with prepayment privileges. This is a predetermined annual percentage that you can pay that sits above your annual mortgage payment every year. If you’re within this percentage, you won’t be penalized, but if you are above it, you will be.

On the other hand, open mortgages allow you to change your mortgage payment frequency along with how much you pay whether it be a lump sum or monthly payment, and how much you pay with each payment that you make. The advantage of open mortgages is they offer greater flexibility to the borrower than closed mortgages.

A fixed-rate mortgage offers a fixed interest rate for a set period of time, while a variable-rate mortgage means that the interest rate changes as the prime rate rises and falls. There are advantages and drawbacks to both models. Fixed-rate mortgages are very predictable because you know exactly what you are paying for a set amount of time and your mortgage interest rate stays the same even when the Bank of Canada raises the overnight interest rate.

On the other hand, if interest rates go lower, you won’t be able to take advantage of the savings, without paying a penalty, until after your mortgage term (and contract) expires. Plus, variable-rate mortgages are generally open mortgages that give you payment flexibility and you can switch to a fixed-rate mortgage at any time. However, you cannot switch from a fixed-rate mortgage to a variable rate one.