Find Today’s Lowest 5-Year Fixed Rate Mortgage

The average insured 5-year fixed mortgage rate from big banks in Canada is 6.11%, while nesto’s lowest 5-year fixed mortgage rate in Canada is .

_{¹Note: The average rate is calculated based on the posted rates of the 6 biggest lenders in Canada that together make up over 70% of the retail mortgage market in the country. These 6 biggest lenders are the chartered banks: Toronto-Dominion Canada Trust (TD), Royal Bank of Canada (RBC), Bank of Montréal (BMO), Bank of Nova Scotia (BNS), Canadian Imperial Bank of Commerce (CIBC) and National Bank of Canada (NBC).}

The national average posted 5-year conventional fixed mortgage rate is 6.84%. The lowest 5-year fixed rates are typically reserved for insured prime lending, with nesto at and the national 5-year insured average sitting at 6.41%.

_{¹Note: The average rate is calculated based on the posted rates of the 6 biggest lenders in Canada that together make up over 70% of the retail mortgage market in the country. These 6 biggest lenders are the chartered banks: Toronto-Dominion Canada Trust (TD), Royal Bank of Canada (RBC), Bank of Montréal (BMO), Bank of Nova Scotia (BNS), Canadian Imperial Bank of Commerce (CIBC) and National Bank of Canada (NBC).}

_{Source: CMHC Records}

_{Source: CMHC Records}

Bond yields directly influence fixed-rate mortgages, meaning a 5-year fixed-rate mortgage will closely follow the movement of 5-year bond yields. 

The bond market significantly impacts fixed mortgage rates in Canada, as banks use it to determine their mortgage rates. Banks use investments like mortgages and Government of Canada bonds to make profits, but the two have significant differences. Bonds provide a no-risk opportunity for banks, guaranteeing at least a minimal profit while requiring no upfront cost. On the other hand, lending money for a mortgage carries a much higher risk for banks, involving costs for approval and setup, and there is no guaranteed profit. Banks calculate fixed mortgage rates based on the interest rates they’re receiving from their investments in bonds. 

The spread is the difference between your fixed mortgage rate and the bond price. The spread or markup between fixed mortgage rates and bond yields can vary, either widening or narrowing, depending on various economic factors. These factors include the banks’ assessment of future risks such as mortgage defaults, origination and servicing costs, as well as their profits. Their profit is limited to the supply and demand of money and, therefore, liquidity in the market. Charter banks must raise their mortgage rates reasonably to remain competitive.

Lenders compete for your mortgage business, so the spread between rates is inconsistent across all of them. Each lender determines their bottom line and may lower rates further if they have the flexibility. Charter banks, which offer a range of investment products, lack the flexibility to offer lower rates. Therefore, a more profitable bond market with higher bond yield will usher lower rates on your fixed mortgage. 

Lenders are quicker to raise their fixed mortgage rates and slower to lower them as bond yields fluctuate. That’s because they want to ensure their costs cover their risks during periods of volatility in the bond market.

Let’s use a hypothetical example of a 5-year bond with a 4% coupon rate to understand how bond prices are determined. When the overall market interest rate rises from 4% to 5%, newly issued 5-year bonds will have higher yields. A higher yield on newly issued 5-year bonds makes existing 4% 5-year bonds less appealing, and their prices decrease. These lower-yielding 5-year bonds would need to be sold at a discounted price to entice investors.

On the other hand, if the market interest rate falls from 4% to 3%, the 4% coupon 5-year bond becomes more attractive compared to newly issued 5-year bonds. As a result, its price increases, and it would be sold at a premium. Buyers would need to offer a higher price to compensate sellers for giving up the opportunity for higher yields on their bonds.

The relationship between bond prices and yields is inverse: bond prices drop to attract buyers when yields go up. Conversely, when yields go down, bond prices rise to compensate sellers for giving up higher yields on their bonds.

This chart illustrates the spread between the 5-year bond yield and the corresponding 5-year fixed mortgage rate.  It also shows the difference in mortgage pricing between nesto’s insured and the comparable average insured rate from Canada’s big banks. We’re tracking this movement from the 1-year anniversary of the current rate tightening cycle started in March 2022 by the Bank of Canada.

_{¹Note: The average rate is calculated based on the posted rates of the 6 biggest lenders in Canada that together make up over 70% of the retail mortgage market in the country. These 6 biggest lenders are the chartered banks: Toronto-Dominion Canada Trust (TD), Royal Bank of Canada (RBC), Bank of Montréal (BMO), Bank of Nova Scotia (BNS), Canadian Imperial Bank of Commerce (CIBC) and National Bank of Canada (NBC).}

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.

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.

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 .

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.

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. 

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.

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.

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.

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.