5-Year Fixed Mortgage Rates in Canada (2000-2024)
What is a 5 year fixed mortgage
A 5-year fixed mortgage is a type of home loan where the interest rate remains constant for a predetermined period, typically five years. During this time, borrowers make regular monthly payments that cover both principal and interest. The key feature of a 5-year fixed mortgage is the stability it offers in terms of interest rates, as the rate remains unchanged for the entire five-year term. This provides borrowers with predictable monthly payments, making budgeting easier. At the end of the five-year term, borrowers typically have the option to renew their mortgage, refinance, or pay off the remaining balance.
Common 5 year fixed mortgage fees
- Origination Fee: Charged by the lender for processing the loan application, typically ranging from 0.5% to 1% of the total loan amount.
- Appraisal Fee: Covers the cost of assessing the property’s value, typically ranging from $300 to $500.
- Credit Report Fee: Covers the cost of pulling the borrower’s credit report, usually between $25 and $50.
- Title Insurance: Protects the lender (and optionally the borrower) against any legal claims or disputes over the property’s ownership. Costs vary, often ranging from $500 to $1,000 or more.
- Closing Costs: Encompass various fees, including attorney fees, notary fees, and recording fees, typically adding up to 2% to 5% of the loan amount.
- Prepayment Penalty: Some lenders charge a fee if the borrower pays off the mortgage early, although this is less common with shorter-term mortgages like a 5-year fixed mortgage. Important to verify if applicable.
- Private Mortgage Insurance (PMI): If the down payment is less than 20% of the home’s purchase price, PMI may be required. It ranges from 0.3% to 1.5% of the loan amount annually.
- Escrow Fees: Covers the cost of setting up and managing an escrow account for property taxes and homeowners insurance, usually a few hundred dollars.
- Survey Fee: If necessary, confirms property boundaries, typically costing between $200 and $500.
- Underwriting Fee: Charged by the lender for evaluating and verifying the loan application, usually ranging from $400 to $900.
Why should you choose a 5 year fixed mortgage
- Stability and Predictability: A 5-year fixed mortgage offers stability with a locked interest rate for the entire term, providing predictability in monthly payments.
- Longer Rate Lock: Compared to shorter-term fixed mortgages, a 5-year term provides a longer period of rate stability, shielding borrowers from potential interest rate fluctuations.
- Lower Interest Rates: 5-year fixed mortgages often come with lower interest rates compared to shorter-term fixed mortgages, resulting in potential interest savings over the term.
- Long-Term Financial Planning: The fixed-rate nature of a 5-year term facilitates long-term financial planning, as borrowers know what to expect in terms of mortgage payments for a significant period.
- Peace of Mind: With a fixed interest rate, borrowers are protected from rising interest rates during the term, providing financial security and peace of mind.
Downsides of 5 year fixed mortgages
- Less Flexibility: Compared to variable-rate mortgages, 5-year fixed mortgages offer less flexibility, as borrowers are locked into a fixed interest rate for a longer duration.
- Potential for Higher Initial Rates: Initial interest rates for 5-year fixed mortgages may be higher than the introductory rates of variable-rate mortgages, potentially leading to higher initial monthly payments.
- Penalties for Early Repayment: Some lenders impose penalties if the mortgage is paid off or refinanced before the end of the five-year term, restricting borrower flexibility.
- Interest Rate Risk: While protected from rate increases during the term, borrowers may miss out on potential interest savings if market interest rates decrease significantly.
- Longer Commitment: A five-year term represents a longer commitment compared to shorter-term fixed mortgages, which may not be suitable for borrowers with shorter-term homeownership plans.
How Does a 5-Year Fixed Mortgage Work?
A 5-year fixed mortgage is a type of home loan where the interest rate remains constant for a predetermined period, typically five years. During this time, borrowers make regular monthly payments that cover both principal and interest. The key feature of a 5-year fixed mortgage is the stability it offers in terms of interest rates, as the rate remains unchanged for the entire five-year term. This provides borrowers with predictable monthly payments, making budgeting easier. At the end of the five-year term, borrowers typically have the option to renew their mortgage, refinance, or pay off the remaining balance.
Ontario Housing Market Overview
Monthly Data Summary
| Region | Date | Avg. Home Price | Monthly Change | Yearly Change |
|---|---|---|---|---|
| Ontario | August 2024 | $817,915 | -2.36% | -1.20% |
| GTA | August 2024 | $1,074,425 | -2.91% | -0.75% |
| Toronto | August 2024 | $1,029,069 | -5.37% | 2.30% |
| Ottawa | August 2024 | $660,341 | -2.84% | 3.14% |
| Mississauga | August 2024 | $1,044,543 | 0.16% | -1.20% |
| Brampton | August 2024 | $984,544 | -2.52% | -2.88% |
| London | August 2024 | $629,259 | -3.87% | -5.18% |
Ontario Housing Market Trends
Ontario, home to 39% of Canada’s population, is a significant player in the national real estate market. As the province continues to grow, with the population projected to reach over 20.4 million by 2046, real estate activity remains high. Notably, Toronto, as Ontario’s largest city, continues to attract new immigrants, yet many homebuyers are seeking homes outside of major urban centers.
In August 2024, the average home price in Ontario was $817,915, a 1.20% decrease from the previous year. In the Greater Toronto Area, home prices averaged $1,074,425. Toronto’s market remains dynamic, showing a 2.30% yearly price increase, despite a monthly drop of 5.37%.
Mortgage Lenders in Ontario
Ontario accounted for 52% of all mortgages in Canada as of 2023. With such a high concentration of real estate activity, many mortgage lenders are available for buyers to choose from, including the Big Six Banks, which collectively hold a dominant market share. However, alternative lenders and private institutions are growing in popularity, especially in higher-priced areas like the GTA.
Mortgage Lenders with Branches in Ontario
| Lender | Number of Branches | Value of Canadian Residential Mortgages (2022) | Value of Canadian Residential Mortgages (2020) |
|---|---|---|---|
| TD | 561 | $246.2 Billion | $202.9 Billion |
| RBC | 508 | $418.8 Billion | $342.6 Billion |
| CIBC | 484 | $233.6 Billion | $216 Billion |
| BMO | 382 | $148.8 Billion | $127 Billion |
| Scotiabank | 437 | $333.7 Billion | $245 Billion |
| Meridian Credit Union | 89 | $12.24 Billion | $11 Billion |
| National Bank | 97 | $80.1 Billion | $65 Billion |
Digital Mortgage Lenders
| Lender | Value of Canadian Residential Mortgages (2022) | Value of Canadian Residential Mortgages (2020) |
|---|---|---|
| Equitable Bank | $30.2 Billion | $17.13 Billion |
| motusbank | $181.87 Million | – |
| Manulife Bank | $21.6 Billion | $20.4 Billion |
With growing populations in the GTA and across Ontario, the real estate market will remain competitive, and mortgage lenders—both traditional and digital—will continue to play a critical role in facilitating homeownership in the province.
FAQs on 5-year fixed mortgage rates
- Stability: Monthly payments remain the same for five years, making budgeting easier.
- Protection: Insulates borrowers from interest rate increases during the term.
- Long-Term Planning: Provides medium-term security, helpful for financial planning and stability.
- Fixed Rate: Interest rate and payments are stable, unaffected by market fluctuations.
- Variable Rate: Interest rate can change with market conditions, potentially leading to lower payments but also higher risk if rates increase.
- Bank of Canada’s Benchmark Rate: Influences lending rates across the country.
- Economic Conditions: Inflation, employment rates, and economic growth can affect rates.
- Lender Policies: Individual lender strategies and risk assessments.
- Borrower’s Credit Score: Higher credit scores can secure better rates.
Yes, breaking a 5-year fixed mortgage before the term ends can incur penalties, often calculated as the greater of three months’ interest or the interest rate differential (IRD).
- Shop Around: Compare rates from different lenders, including banks, credit unions, and mortgage brokers.
- Negotiate: Don’t hesitate to negotiate terms and rates with lenders.
- Consider Additional Costs: Look at fees, penalties, and other costs associated with the mortgage.
Yes, you can switch, but be aware of any penalties for breaking the term early and the potential costs involved in switching.
At the end of the 5-year term, you can renew your mortgage with your current lender, negotiate a new rate, or switch to a different lender. It’s an opportunity to reassess your financial situation and mortgage needs.
It can be, as it offers stability in payments and a longer commitment period. However, first-time buyers should consider their long-term plans and financial situation when choosing a mortgage term.
Economic conditions such as inflation, the Bank of Canada’s policies, and overall economic health can lead to fluctuations in mortgage rates. During periods of economic stability, rates may be lower, whereas economic uncertainty can lead to higher rates.
Some lenders offer special programs for first-time buyers, professionals, or those with higher credit scores, which can include lower rates or additional incentives.
- Pre-Approval: Determine how much you can borrow based on your financial situation.
- Application: Submit an application with necessary documentation (income verification, credit score, etc.).
- Approval: Lender reviews and approves the mortgage based on their criteria.
- Closing: Finalize the mortgage agreement and complete the property purchase.
Conclusion: Navigating the Best 5-Year Fixed Mortgage Rates in Canada
Congratulations on completing our guide to the Best 5-year fixed mortgage rates in Canada! Throughout this journey, we’ve explored the realm of stable and predictable mortgage financing, uncovering insights into securing competitive rates amidst the Canadian housing market. Armed with knowledge about top lenders, market trends, and factors influencing mortgage rates, you’re now equipped to make informed decisions aligned with your long-term financial goals. Whether you’re a seasoned homeowner or embarking on your homeownership journey, this guide provides the tools to navigate the intricacies of 5-year fixed mortgages with confidence. Here’s to finding the perfect mortgage rate that paves the way for homeownership success in Canada!
