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Find Today’s Lowest 5-Year Fixed Mortgage Rates

The most popular fixed-rate mortgage option is the 5-year term. At nesto, you can expect to receive the very best rate every time. Thanks to our advanced technology, we’re able to compare the market in seconds to find the most affordable mortgage while our commission-free mortgage experts provide you with unbiased support throughout the process.

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Find The Best 5-Year Fixed Mortgage Rates

Currently, 70% of Canadian homeowners choose a fixed rate. Moreover, more than 60% choose a 5-yr term for their mortgage renewal – making the 5-year fixed rate the most common choice for mortgages in Canada.  This is not always the best choice for everyone, and it is recommended to have a professional mortgage expert guide you through this very important decision.

Fixed-rate terms are offered for 1-year, 2-year, 3-year, 4-year, 5-year, 7-year and 10-year. Not every lender can offer each term as they want to stay competitive in the market with their offers. Lenders must balance between offering more options or keeping their most popular option competitive.

A fixed-rate mortgage means a fixed payment with a set amount to principal and interest over your term.  Your term is set for specific years you have locked your fixed rate. 

Once your term ends, you must renew your mortgage for a new term with a new rate.  There may be many terms in the life of your mortgage – known as amortization.  The new rate and term will depend on your circumstances and choices.

It’s important to understand that all borrowers must meet the Federal standard approval guidelines and be stress tested. Stress testing means qualifying on the greater of the Bank of Canada Benchmark Rate or the contract rate plus 2%, regardless of the actual rate or term on the mortgage contract. This stress test is in place to reduce the lender’s risk and ensure you can comfortably afford to pay back your mortgage should rates be higher at the time of your next renewal.

Benefits of Fixed-Rate Terms

A fixed-rate benefits budgeting and offers financial stability, given that mortgage payments always remain predictable throughout the term. Fixed rates tend usually be higher, but this is the premium to pay for the assurance of peace of mind.

And while variable mortgages have proven to be more cost-effective over time than fixed mortgages, some people prefer the certainty of having the same payment throughout the mortgage term.

For first-time homebuyer (FTHB) who is getting used to all their new bills related to owning a home, it is recommended that they choose a fixed rate to provide some stability during the first term of their mortgage. By making their biggest monthly obligations (mortgage, condo/maintenance/strata fees and property taxes) static amounts, they can take the time to put together a financial plan and start to put aside some money towards their emergency savings.

Fixed-rate mortgages may also be a better option for homebuyers and homeowners looking for a reliable payment schedule to manage a tight budget or are generally more cautious about risk (of their payment increasing). Although fixed-rate mortgages generally have higher rates, they may still provide peace of mind for a young family with a large mortgage balance relative to their household income.

Historical 5-Year Fixed Mortgage Rates

The chart below shows Canada’s most popular mortgage rate type since 1951.

Historical Annualized Average of the Canadian Residential 5-Year Fixed Mortgage Rates from 1951 to 2022. Source: CMHC Records

Historical Decadal Average of the Canadian Residential 5-Year Fixed Mortgage Rates from the 1950s to 2020s running average. Source: CMHC Records

Popularity of the 5-Year Fixed-Rate Mortgage

Canada’s most common mortgage term is 5 years, specifically the 5-year fixed-rate mortgage. While this is the most popular option, it may not be the most economical for everyone.

Borrowers are most likely to select a 5-year term for the following 3 reasons:

  • They are conditioned to think it’s the best choice since they hear about it most
  • Pricing is attractive as lenders provide bigger discounts on longer terms to avoid the costs of finding new clients
  • They can defer the negotiation process for 5 years at a time

A lot can happen throughout 5-years, so consider your future goals when selecting each mortgage term. If you plan to break your mortgage early, you could face some high early payout penalties, so consider short and long-term goals when discussing your mortgage with an advisor.

What drives changes in 5-year fixed mortgage rates?

A bond is a debt security governments issue to service their spending and obligations. Bonds are treated as investment instruments sold by the federal, provincial or municipal governments that pay a guaranteed, fixed level of interest until maturity. Fixed interest rates fluctuate based on bond yields

Bond Yields are traded bond returns that banks use to set their fixed mortgage rates. Both the traded bond returns (bond yields) and mortgages are sources of capital for the big banks. But bonds are considered a safer investment, while fixed-rate mortgages come with added risk. The cost of this risk is added as the lender spreads to the mortgage rates they offer. 

Interest rates have an inverse relationship to bonds, which means that as money becomes more expensive to borrow, bond prices generally fall – and vice versa. Why? Because bonds pay the holder a fixed interest rate that becomes more attractive if interest rates fall. This drives up demand and, therefore, the bond’s price. 

Conversely, if interest rates go up, investors will no longer see the value of the comparatively lower fixed rate paid by the bond, resulting in lower demand and a declining bond price.

That’s why fixed mortgage rates are usually higher than current bond yields. The spread can be pushed up and down as the bond market changes in anticipation of policy, market sentiment, and economic factors. Factors such as inflation, employment and exports won’t change your rate if you’re already locked in, but they can affect the current 5-year fixed rates. When bond yields rise, funding mortgages become more costly for lenders, so they will increase their advertised rate to make a profit.

Frequently Asked Questions

On the hunt to learn more about 5-year fixed-rate mortgages? Here are some of Canadians’ most commonly asked questions in 2023 about this hugely popular mortgage term.

What is a 5-year fixed mortgage rate?

A 5-year fixed mortgage rate is a static rate with a static payment fixed for 5 years. A mortgage has a much longer term known as the amortization period, which will compose 5 to 6 of these 5-year terms totalling 25 to 30 years. Today’s 5-year fixed mortgage rate in Ontario is %.

How are 5-year fixed rates set?

Lenders change their rates based on how expensive it is to find the capital to fund your mortgage. The main factor affecting how 5-year fixed rates are set the 5-year bond yield market. 

Lenders use this to determine how much it will cost them to fund 5-year fixed-rate mortgages and will use the forecasted earnings they receive from government bonds to dictate how high or low they should set their rate. When you borrow at a 5-year fixed mortgage rate, your lender will add a spread to their bond yield based on the risks involved with your mortgage.

What are the differences between fixed and variable rates?

With a variable mortgage, the interest rate will fluctuate depending on benchmark rates, whereas a fixed rate remains the same throughout the mortgage term. A fixed-rate benefits budgeting and offers financial stability, given that mortgage payments always remain the same. 

Deciding on a variable-rate or fixed-rate is a question of personal choice and risk appetite. We would recommend speaking with a mortgage professional to assess any material risks that may pose a concern for you over the term of your mortgage. 

And while variable mortgages have proven to be more cost-effective over time than fixed mortgages, some people prefer the certainty of having the same payment throughout the mortgage term.

Is it a good idea to refinance a 5-year fixed mortgage?

Refinancing out of a 5-year fixed rate can be expensive, but the answer will depend on your current circumstances and overall savings. Refinancing your mortgage is a great way to access the equity in your home, consolidate debt, or find a better rate. 

Most homeowners refinance for the above reasons or to find a better rate.  If you aim to find a better rate, you can renew at lower rates but only add a max of $3000 in penalty and fees – and avoid a higher rate on a refinance.  If the option does not exist to renew (early without penalty) at your current lender, then refinancing is the only way to get the results you’re looking for. 

You’ll have to consult a mortgage expert to do a cost analysis.  On one side, you will have to compare the interest costs on the new rate with the new or current lender, plus penalty, appraisal/discharge fees at the current lender; on the other side, you will have to work out the interest carrying costs to bring your mortgage to term.

Refinance rates are always higher than renewal rates, so you must make sure it makes sense for your situation.  There may be times, such as right now, when it may make sense to refinance your variable rate mortgage (VRM) as it is getting closer to its target point before your prime rate rises any further.

Why compare 5-year fixed rates with nesto?

At nesto, we want to make finding the right mortgage quicker and easier. We show you the best 5-year fixed-rate mortgages, saving you time, money, and energy. On top of this, our mortgage experts are licensed professionals who can help you determine the most suitable solution for your unique needs. Not only are you getting the best market rates available, but you’re also getting total support, guidance, and the expertise to make the best decision.

If I see a 5-year fixed mortgage rate I like, how do I lock it?

A mortgage rate hold allows you to lock in a rate once qualified, and then the lender will issue you a commitment to hold a fixed rate for your mortgage. Depending on the rate offered, lenders will hold your rate for a set time – say 60 to 180 days. Most lenders will add a premium to the rate for holding it longer.

If you’ve already found a 5-year fixed mortgage that you like, the next thing to do is consult a mortgage expert to see if this fixed rate applies to you. At nesto, we make it easy; we show you the best rates upfront, and you chat with a mortgage expert who will guide you by understanding your situation before qualifying you for that rate.  

The mortgage advisor will guide you to understand your needs and goals. They will also explain all the restrictions, features and benefits and discuss the cost analysis to see if locking into a new rate and term makes sense for your current financial situation. They will be able to provide you with tailored advice for your unique needs.

Your Unique Circumstances

The rate and term you pick will depend on your current circumstances and future expectations.  Ultimately, you will have to discuss your financial situation and details to complete a cost analysis with a mortgage expert at nesto.  

The mortgage expert will guide your choices to develop a solution that makes the best sense for you. As the value of any mortgage depends on the client who takes it, it is very important to have an in-depth conversation with a mortgage expert to understand that your choice suits your needs.

How nesto works

At nesto, all of our commission-free mortgage experts hold concurrent professional designations from one or more provinces. We believe that our clients will receive the best advice and care when they speak with specialists that exceed the industry status quo. 

Unlike the industry norm, our agents are not commissioned but salaried employees. This means you’ll get free, unbiased advice on the most suitable mortgage solution for your unique needs.  Our advisors are measured on the satisfaction and quality of advice they provide to their clients. 

nesto’s working hard to change how the mortgage industry functions. We start with honest and transparent advice, followed by our best rates upfront.  We can offer you these best rates by using technology by providing a virtual and 100% online process to reduce our overhead costs.  

By working remotely across Canada, all our mortgage experts and staff spend less time commuting to work and more time with their friends and family. This makes for more dedicated employees and, in turn, contributes to our success with happy and satisfied clients.

nesto is on a mission to offer a positive, empowering and transparent property financing experience, simplified from start to finish.