Find Today’s Lowest 3-Year Variable-Rate Mortgages

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Today’s Best 3-Year Variable Rates

Your Guide to Getting the Best 3-Year Variable Mortgage Rates

About 70% of all mortgage holders across Canada currently have a fixed mortgage rate. That’s not because it’s the best choice but, rather, because they think they’re playing it safe. Historically, however, variable-rate mortgages have proven to save borrowers the most money as part of a longer-term mortgage strategy. So it makes sense to explore this option with one of our experts today.

A variable-rate mortgage fluctuates with the lender’s prime rate throughout your mortgage term. So, while your variable-mortgage payment will remain the same over your term, your interest rate may change based on market conditions. If the prime rate rises or falls, this impacts the amount of principal you pay off each month. When rates on variable mortgages drop, more of your payment is applied to your principal balance. And, conversely, if rates increase, more of your payment will go towards the interest portion of your mortgage.

Benefits of Variable-Mortgage Terms

Variable-rate mortgages appeal to homebuyers who are looking to save money throughout the term of their mortgage, and are willing to take on the risks associated with fluctuations in rates over time.

If you do go variable, if rates fall, more of your payment goes directly towards paying off the principal amount of your mortgage. This means you’ll pay less interest on your mortgage throughout your term – as well as the life of your mortgage if you stick with a variable rate.

It’s also cheaper to break a variable-rate mortgage – three months’ interest payment vs an interest rate differential (IRD) penalty often associated with breaking a fixed-rate mortgage.

Even if you’re more conservative when it comes to your finances, if you happen to be buying a home or renewing your mortgage term within a falling rate environment, this would be an opportune time to try out a variable-rate term.

Popularity of the 3-Year Variable-Mortgage Rate

The most popular variable-mortgage terms are 3 year and 5 year, although they’re available in all increments from 1 to 5 years, with some lenders offering longer terms as well. 

Much like the 5-year fixed-rate term popularity, the 5-year variable option is most common among Canadians. Those who aren’t sure whether they’ll remain in their current home for 5 years are most likely to select a 3-year variable term.

What Drives Changes in Variable-Mortgage Rates?

A variable-rate mortgage fluctuates with the lender’s prime rate – which often mirrors movement in the Bank of Canada’s key interest rate – throughout your mortgage term. 

Two key benefits of having a variable-rate mortgage, therefore, is that:

  • If rates fall, more of your payment goes directly towards paying off the principal amount of your mortgage. In other words, you’ll pay less interest on your mortgage throughout your term.
  • It’s cheaper to break a variable-rate mortgage – three months’ interest payment vs an interest rate differential (IRD) penalty often associated with breaking a fixed-rate mortgage. 

It’s interesting to note that many banks promote fixed rates because that’s where they earn their biggest profits. This is also why many borrowers are most familiar with fixed rates – and the 5 year term, in particular – as it’s what they’ve been accustomed to hearing about from the banks.

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