Today’s Canadian Mortgage Rates
2.02% for a 3-year fixed mortgage rate
1.92% for a 5-year fixed mortgage rate
0.82% for a 5-year variable mortgage rate
One day ago, the average 5-year fixed mortgage rate was 1.92%.
Data provided was obtained from the websites of the institutes listed. Rates are time sensitive and may change. Accordingly, there is no warranty that these rates are correct. Payments do not include amounts for taxes and insurance premiums. The actual payment obligation will be greater if taxes and insurance are included.
How do mortgage rates work?
A mortgage rate is the rate of interest you agree to pay when you borrow money from a lender to buy a property. Interest serves as the lender’s reward for letting you borrow their cash. The mortgage rate is expressed as a percentage of the principal, or original loan amount.
So how do lenders decide what mortgage rate to charge you? Part of the calculation comes down to factors that can vary widely from lender to lender, but the primary influencer is the government bond market.
Banks use their earnings from selling bonds to cover the costs and possible losses associated with selling mortgages. When demand for bonds is strong, banks feel safer lowering their fixed mortgage rates. But when bond activity drops, banks raise their fixed rates to compensate for the reduced security from dealing in bonds.
Meanwhile, variable mortgage rates are determined by changes in the Bank of Canada’s overnight rate. That’s the interest rate banks charge when they borrow money from each other. Banks use the overnight rate to establish their own prime rates, the rates they charge their most trusted customers. Variable rates move up and down when prime rates rise and fall with the BoC overnight rate.
What are mortgage rates in Canada right now?
Because multiple things can move mortgage rates, they change constantly. Predicting tomorrow’s rates is a bit of a fool’s errand, but the handy chart below can tell you where mortgage rates sit today.
Canada mortgage rates: Historical trends
Taking a look at mortgage rate activity over the years can be a fairly fruitful endeavour. Seeing where rates have been can help you understand how today’s rates stack up.
- 3 Year Fixed
- 5 Year Fixed
- 5 Year Variable
Jesse Abrams, Co-Founder, CEO of Homewise
Mortgage rates are still at near-record lows, and it doesn't look like there will be major movement over the next six to 12 months because of three major factors: bond yields, immigration and the Canadian economy’s heavy reliance on housing.
Interest rates are often driven higher by Canada's five-year bond yields, but the current five-year yield is still stabilized at just half what it was the last time Canada saw rates above 3%. Immigration is also low in Canada right now, which heavily impacts the homebuyer market.
The country will look to keep rates low to stimulate homebuying among the current population of Canadians.
Fixed vs. variable mortgage rates
A key decision you’ll make during the mortgage process is which type of mortgage rate you want to pay. In most situations you’ll be choosing between a fixed- or a variable-rate mortgage.
Fixed mortgage rates
With a fixed-rate mortgage, the interest rate you pay remains the same throughout your loan term. If you take out a five-year fixed mortgage — by far the most popular mortgage product in Canada — the interest rate you pay at the beginning of your term will be the same five years from now when it’s time to renew, refinance or pay off your mortgage in full.
Fixed-rate mortgages are great for people who don’t have room in their budgets for increases in interest. But the loans can be problematic if you need to get out of your mortgage before the term officially ends. Prepayment penalties associated with breaking a mortgage can cost tens of thousands of dollars.
Variable mortgage rates
If you take out a variable-rate mortgage, the amount of interest you pay will fluctuate as mortgage rates rise and fall in response to changes in the Bank of Canada’s overnight rate. Your monthly payment stays the same every month, but the portion that goes toward interest will increase or decrease depending on the direction mortgage rates have moved.
If your mortgage rate moves up, more of your payment will be eaten up by interest. If it moves down, more will go toward the principal.
While variable mortgages are somewhat of a gamble, they do have their benefits. The starting rates are often lower, and the penalties for breaking a variable-rate mortgage are far less painful than those associated with fixed-rate mortgages.
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Open vs. closed mortgages
Understanding the difference between open and closed mortgage products is another important step in your mortgage journey. You’ll have to choose one or the other, and your decision can greatly influence the overall flexibility you’ll have as a borrower.
With an open mortgage, you can prepay any amount of your loan at any time without having to pay a penalty. Got an extra $500 this month that you’d like to put toward your mortgage? An open mortgage will allow you to do that, but you’ll pay a higher interest rate for the privilege.
With a closed mortgage, you can still prepay, but within limits set by your lender. Most lenders permit you to prepay only a certain percentage of your original or outstanding balance per year, with many capping borrowers at 15%. Closed mortgage rates are generally more attractive than rates on open mortgages.
What do I need to apply for a mortgage?
When you apply for a mortgage, you’re essentially trying to prove to lenders that you’re creditworthy. To show that they can trust you with their money, you’ll need to provide the following things.
Proof of income
Lenders must believe you’re capable of making your monthly mortgage payments. Most will ask to see evidence — in the form of pay stubs — that you’re currently earning a reasonable living. If you’re self-employed, you’ll need two consecutive years’ Notices of Assessment from the Canada Revenue Agency.
Lenders also will want to know how long you’ve been with your employer and what your job is. If you work in an industry where layoffs or business closures are becoming common, that may work against you.
The minimum down payment for a home purchase in Canada is 5%. If you plan to buy a home as an investment property that you don’t intend to live in, you’ll need to put down a much heftier 20%.
A higher down payment can be hard to save and pull together, but it can seriously shrink the size of your mortgage and help you avoid costly mortgage insurance premiums.
While credit scores of 680 and above are considered “good” by most lenders, some will lend to borrowers who have scores as low as 600. Keep in mind that if your credit score is in the lower ranges of creditworthiness, you’ll be paying a higher interest rate.
Your debt-to-income (DTI) ratio is a calculation lenders use to assess your current debt load. They’re wary of burdening you with a huge monthly mortgage payment if it’s going to torpedo your finances.
DTI shows how much of your gross monthly income is already devoted to payments to creditors. If you earn a monthly income of $5,000 but pay a total of $2,500 in car and student loan payments every month, your DTI will be 50%. That’s way too high for most lenders.
A DTI in the mid- to low 30s is considered ideal, but some lenders will still do business with you if your DTI is in the low 40s. If you need to improve your debt-to-income ratio, you basically have two options: earn more money or reduce your monthly debt obligations.
A lender may also ask you for:
- A list of assets, to see that you have financial flexibility in case your income is disrupted.
- A detailed employment history that demonstrates your ability to hold down a job.
- Assurances that you don’t have any unpaid income or property taxes, or personal issues that may cause financial problems down the road, like addiction or a looming divorce.
How to lower your mortgage rate
Even though mortgage rates are largely determined by bond markets and major financial institutions, you do have a fair amount of influence over the rates lenders will offer you personally.
Improve your credit score
A strong credit score demonstrates that you can responsibly handle your debt obligations. If your credit score is average or worse, lenders will be less likely to give you a loan at an attractively low rate.
Most lenders won’t want to work with you if your credit score is lower than 600. And if you’re in the 600-660 range, you won’t be offered a desirable rate.
Check your credit score and see where it stands. Then, get busy doing what you can to improve it. Pay down your debts and make sure there aren’t any lingering credit issues that may prevent your credit score from getting where it needs to be.
Prove you have a steady, stable income
This is a big one, and it can be a real struggle for people who do seasonal work or freelance. Lenders are looking for reasons to be confident in your ability to pay them back; demonstrating an ability to commit to an employer long term — and having an employer keep you on for a long haul — does just that.
Shop for the best rate
Lenders succeed only if they can generate a steady stream of new business. That’s why the Canadian mortgage space is so competitive.
One of the most effective tools in attracting new customers is providing the lowest rates, so lenders will always try to outdo each other with the rates they offer. Take advantage of this perpetual rivalry. Compare several lenders’ rates before picking up the phone and calling a mortgage broker.
Put more money down
In Canada, the minimum down payment required for a mortgage is 5%. But putting only 5% down won’t give lenders much comfort about giving you money. They’ll be lending you 95% of your property’s value, after all.
When you make a larger down payment, it reduces your lender’s risk while also demonstrating your ability to save money. And if you’re able to put down 20% or more, you’ll avoid having to pay mortgage insurance.
If you already have a mortgage and are looking for a little rate relief, you may be able to refinance your loan and cut the amount of interest you’re paying.
Refinancing, or renegotiating your loan so you pay a lower interest rate than the one you originally agreed to, is allowed once the end of your loan term rolls around. You can refinance in the middle of your term, but that will require you to break your mortgage — which can trigger steep penalties.
Don’t let one of today’s low mortgage rates slip through your fingers.
Rising home prices are a big worry across Canada, MoneyWise finds
In our poll, most Canadians say the government should rein in housing costs.
The average selling price of a home in Canada soared by more than 38% from May 2020 to May 2021, according to real estate industry data, and in the Greater Toronto Area the typical price now tops $1.1 million. The staggering numbers are hitting people hard, as MoneyWise found by commissioning a nationwide survey. Our poll, conducted by YouGov, found Canadians are deeply troubled by a housing market that seems out of control and is causing many to conclude homeownership is a goal they’ll never be able to reach. A majority say the situation demands government action.
What we learned
- Skyrocketing home prices are a worry for 7 out of every 10 people in Canada, covering all regions and all age groups.
- Most Canadians feel the government should respond by providing a much larger volume of affordable public housing units.
- Other potential remedies for rising home prices that are favoured by Canadians include: higher taxes or other actions by government officials; and interest rate hikes from the Bank of Canada.
- Only one-quarter of Canadians prefer to do nothing and allow the market to do what it will.
- Real estate experts don't see anything on the horizon that would cool off housing prices.
This poll was conducted online by YouGov from June 16-22, 2021, using an interview administered to individuals who have agreed to take part in surveys. The total sample size was 1,032 adults. The results have been weighted and are representative of all Canadian adults ages 18 and older.
Frequently Asked Questions (FAQ)
How much can I save by comparing mortgage rates in Canada?
Quite a bit, actually.
Let’s say you’re planning to purchase a home for $700,000. You put 20% down, so the amount you’re borrowing is $560,000. One lender is offering a five-year variable-rate mortgage at 3.6% and an amortization period of 25 years. Your monthly payment would be $2,825, an amount you can comfortably afford.
But it turns out another lender is offering a five-year fixed-rate mortgage at 2.44%, resulting in monthly payments of $2,491. That’s a savings of $334 a month, or just over $4,000 a year.
How do I compare mortgage rates in Canada?
Comparing mortgage rates has never been easier. You can hop online (or use our own comparison tools) and start looking at rates side by side with a few keystrokes. The more lenders you compare, the better your chances of finding the best deal.
When you compare rates, keep an eye out for APRs, or annual percentage rates. An APR includes the interest rate and any additional fees or costs involved with your mortgage. It’s a percentage that more accurately reflects the actual cost of your loan.
And be sure to compare more than just interest rates. Look at how fees, penalties and terms contrast across lenders. Those can all lower the overall cost of your mortgage, which should be your primary concern.
What are mortgage prepayment charges?
The sooner you pay off your mortgage, the sooner your lender stops earning interest from you. Banks need their projected mortgage earnings to keep their books in shape, so they’re not too keen on borrowers exiting their mortgages early.
That’s why you’re likely to hear about prepayment charges when shopping for your mortgage.
Be sure to read up about potential prepayment penalties at every lender you consider. You’ll face penalties if you:
- Pay more than the amount your lender allows for early payments.
- Break your mortgage contract.
- Transfer your mortgage to another lender before the end of your term.
How do I get the lowest mortgage rate?
There are many things you can do to ensure you’re getting the lowest mortgage rate possible:
- Compare rates across several different lenders.
- Wipe out long-standing debts and improve your credit score.
- Save up a larger down payment.
- Shorten the length of your loan.
- Refinance your mortgage.
- Ask your bank for a lower rate.
What is a mortgage interest rate lock?
When you agree to a rate lock with a lender, you are granted a predetermined interest rate for a certain number of days between the approval of your mortgage and the day when you close on your home.
Because mortgage rates are so dynamic, they can easily rise over the span of a week or month. Rate locks can save homeowners from the nasty surprise of being denied funding because the rate they were offered the last time they spoke to their mortgage broker is no longer available.
Anything else I can do to lower my mortgage rate?
Work with a mortgage broker you feel comfortable with. Experienced brokers will have hundreds of residential mortgages under their belts, be able to sniff out low rates at a host of lenders and be willing to negotiate better ones on your behalf.
Mortgage Rate News
Read the latest on mortgage rates, the trends that shape them and the strategies that can save you money on your next home loan.