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Today’s National 3-Year Variable Mortgage Rate Trends

For Wednesday, April 17, 2024:

The average insured bank interest rates in Canada for a 3-year variable and adjustable mortgage are unchanged since last week and now stand at 7.75%. Compared to a month ago, these rates are unchanged.

1 basis point is 1/100 of a percentage point which is equal to 0.01%.

What is the best 3-year variable mortgage rate in Canada?

The average insured 3-year variable mortgage rate from big banks in Canada is 7.75%, while nesto’s lowest 3-year variable mortgage rate in Canada is .

Note: 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).

What is the lowest 3-year variable mortgage rate in Canada?

Currently, variable rate discounts (or added premiums) on the 3-year term range from 0.15% to 1.50% from the Bank prime rate sitting at . The most discounted variable rates are generally reserved for insured prime lending, with nesto leading the pack at while the national average sits at 7.75%.

Note: 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).

nesto’s lowest vs Big Bank insured mortgage rates

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For the month of April, 2024, nesto’s average 3-year variable mortgage rate can be compared against the big 6 banks in Canada. Choose nesto and see how much you can save.

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

Typically, 70% of all mortgage holders across Canada prefer to carry a fixed mortgage rate.  This preference is not due to its lure as the cheapest or best option but rather for its predictable and safe repayment schedule.  Interestingly, many banks promote fixed rates because that’s where they earn their most significant profits. A likely reason why many borrowers are more familiar with fixed rates.  Historically, variable-rate mortgages have saved borrowers the most money over time as part of a longer-term mortgage strategy. So it may make sense for you to explore this option.

A variable interest rate can increase and decrease during your term. If you choose a variable interest rate, your rate may be lower than a fixed rate.  Having a variable interest rate means you’ll also be the first to realize savings or costs due to fluctuations in your lender’s prime rate.

How are 3-Year Variable Mortgage Rates Priced?

A variable-rate mortgage fluctuates with nesto’s prime rate – which mirrors the movement in the Bank of Canada’s key policy rate – throughout your 3-year mortgage term. 

Interest rate is the percentage of interest any lender charges throughout a loan. There’s a difference between interest rates set by the banks and those set by the Bank of Canada (BoC).

The Bank sets a baseline interest rate twice every quarter. This baseline rate is the Key Overnight Target Rate used to lend money to banks.  Banks will add a spread to this baseline and call it their Prime Rate.

How do 3-year variable mortgage rates relate to the prime rate?

3-year variable mortgage rates fluctuate with nesto’s prime rate – which mirrors the movement in the Bank of Canada’s key policy rate – throughout your mortgage term. 

Interest rate is the percentage of interest any lender charges throughout a loan. There’s a difference between interest rates set by the banks and those set by the Bank of Canada (BoC).

The Bank sets a baseline interest rate twice every quarter. This baseline rate is the Key Overnight Target Rate used to lend money to banks.  Banks will add a spread to this baseline and call it their Prime Rate.

Bank of Canada Policy & Prime Rate Changes

Date of Rate ChangeKey Overnight Target Rate (%)Change (%)Bank Prime Rate
June 2, 20100.30%0.25%2.50%
July 21, 20100.55%0.25%2.75%
September 9, 20100.80%0.25%3.00%
January 28, 20150.65%-0.15%2.85%
July 16, 20150.50%-0.15%2.70%
July 13, 20170.75%0.25%2.95%
September 7, 20171.00%0.25%3.20%
January 18, 20181.25%0.25%3.45%
July 12, 20181.50%0.25%3.70%
October 25, 20181.75%0.25%3.95%
March 5, 20201.25%-0.50%3.45%
March 17, 20200.75%-0.50%2.95%
March 30, 20200.25%-0.50%2.45%
March 3, 20220.50%0.25%2.70%
April 14, 20221.00%0.50%3.20%
June 2, 20221.50%0.50%3.70%
July 14, 20222.50%1.00%4.70%
September 7, 20223.25%0.75%5.45%
October 26, 20223.75%0.50%5.95%
December 7, 20224.25%0.50%6.45%
January 25, 20234.50%0.25%6.70%
March 8, 20234.50%0.00%6.70%
April 12, 20234.50%0.00%6.70%
June 7, 20234.75%0.25%6.95%
July 12, 20235.00%0.25%7.20%
September 6, 20235.00%0.00%7.20%
October 25, 20235.00%0.00%7.20%
December 6, 20235.00%0.00%7.20%
January 24, 20245.00%0.00%7.20%
March 6, 20245.00%0.00%7.20%
April 10, 20245.00%0.00%7.20%

The Bank of Canada (BoC) will deliberate on the Key Overnight Target rate twice every quarter. Generally, all lenders will follow suit to keep their prime rates in line with the country’s Big Six chartered banks. Find below the most recent changes to the baseline, which impacted the spreads to the Big Banks Prime Rates.

You can find more details about the Key Overnight Target Rate and an explainer from the Bank of Canada (BoC) if you want to learn more about this topic.

How are 3-year variable mortgage rates determined?

The interest rates charged on 3-year variable mortgages are affected by changes in the Bank Rate and Policy Rate (also known as the Target for the Overnight Rate) set by the Bank of Canada. Every lender uses the Policy Rate to determine their prime rate. Since variable-rate mortgages fluctuate with their lender’s prime rate, there is a direct correlation between the overnight rate and the interest rate on variable mortgages.

Lenders often provide a discounted 3-year variable rate to attract customers and compete with other lenders. The discount amount is determined by each lender’s profitability and market conditions. When you sign up for a variable rate, your lender discount remains unchanged throughout the mortgage term, even if the rate fluctuates. When your lender’s prime rate changes, the rate on your variable-rate mortgage (VRM) and your adjustable-rate mortgage (ARM) will move in tandem with their discounts.

What drives changes in 3-year variable mortgage rates?

3-year variable mortgage rates fluctuate with your lender’s prime rate. The prime rate is determined by the Bank of Canada’s overnight lending rate, which is decided at 8 scheduled meetings yearly. Usually, the policy and prime rates move in tandem, but there can be exceptions. 

Changes in the policy rate directly impact short-term interest rates, including the prime rate used by banks and lenders for 3-year variable-rate mortgages. The policy rate set by the Bank of Canada can also influence long-term interest rates, especially if a lasting change is anticipated. Expectations about the Bank of Canada’s ability to manage inflation determine fixed mortgage rates; however, the policy rate serves as the benchmark for all rates in Canada.

3-year variable rates are typically expressed as prime plus (+) or minus (-) a certain percentage. This premium or discount remains consistent throughout your mortgage term relative to the prevailing prime rate. If you have a 3-year variable-rate mortgage, you have the option to convert to a fixed rate without any additional cost during the mortgage renewal process.

How much do lenders make on their 3-year variable mortgages?

This chart illustrates the spread between the Bank of Canada’s policy & prime rates and the corresponding 3-year variable mortgage rate.  It also shows the difference in variable mortgage pricing discounts 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.

Note: 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).

Variable Mortgage Types

There are 2 types of variable-rate mortgages: those that have static payments and those that have fluctuating payments. Static payment variable-rate mortgages are more specifically called variable-rate mortgages (VRM). In contrast, variable-rate mortgages with a fluctuating payment, where the payment adjusts with changes in the lender’s prime rate, are more accurately called adjustable-rate mortgages (ARM). Commonly, they are both known as variable-rate mortgages.

Variable-Rate Mortgage – Fixed Payments with a Fluctuating Rate

This option offers a fixed payment which does not fluctuate with interest rate changes over the mortgage term.  

As the payment is intended to stay the same, any increases to the interest rate will mean that more of the regular payment goes towards interest. An increasing interest rate component will cause the principal balance not to be paid. The repayment schedule could change – increasing your remaining amortization.  Although not often, when rates go up, they can cause this type of mortgage to over-amortize. Over-amortization means that when your 3-year term ends, you may have added another 7 more years to your amortization.  

If you’re in this option in a rising rate environment, you’re most at risk of payment shock at renewal.  Additionally, you may be affected by trigger rates and trigger points during the term of your mortgage. These risks are explained below by examining how they affect a fixed (or static) payment variable-rate mortgage.

If interest rates decrease, then more of your payment will go toward the principal causing the mortgage to be paid off faster – meaning a lower remaining amortization at the end of your term.  It has been evident in the past market cycles that, generally, rates will have a downward trend creating interest cost savings for borrowers who choose this option.  This overpayment means that possibly at the end of your 3-year mortgage term, you could have paid off 8 years of principal.

Adjustable-Rate Mortgage – Adjustable Payments with a Fluctuating Rate

This option offers an adjustable payment which fluctuates with interest rate changes over the mortgage term. 

With this arrangement, the principal portion of your mortgage payment stays consistent throughout your mortgage term. The interest portion of your mortgage payment will fluctuate with changes to your lender’s prime rate. 

You will realize a change to your mortgage payment with each change to the interest rate on your variable-rate mortgage with fluctuating payments. No changes to your remaining amortization are expected unless you Prepay any part of your principal mortgage balance during the term of your mortgage.  No risks are associated with this mortgage option except payment shocks in a rising rate environment.

Benefits of Variable Mortgage

Whether you choose a fluctuating payment (ARM) or fixed payment (VRM) option, they share some key benefits.

1. 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.

2. 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. 

Disadvantages of Variable Mortgage

Three main disadvantages of variable-rate mortgages affect the fixed (or static) payment version of this type of mortgage.

Payment Shock

The main drawback of fixed payment variable rate mortgages may be payment shock at renewal time. How could this happen? If rates go up and your payment doesn’t, your mortgage could over-amortize. That means the remaining amortization and balance will exceed your expected repayment schedule. Your new payment will be based on the remaining mortgage balance on an amortization reduced by your term. 

For example, if you go into your mortgage term with a 25-year amortization, after 3 years, you should have only 22 years left.  However, if your mortgage has over-amortized, you could have 29 years left to pay when you finish your term.  At the time of renewal, your amortization will have to be rolled back to the chronological 20-year remaining period, thus causing your payment to be much higher.

Trigger Rates

The trigger rate on the variable-rate mortgage is reached when the fixed payment no longer covers the mortgage payment’s interest portion.  The trigger rate occurs when no principal is paid down on your mortgage, leaving only the interest paid down while rates increase.

Once you hit your trigger rate before renewal, your lender may offer to re-adjust your mortgage payment, similar to renewal, to balance it back to where it should be.

You can proactively take control of your mortgage by exercising one of the following options:

  1. You can renew your mortgage with an adjustment to your payment to bring it in line to continue paying down your principal.
  2. You can pay down your principal and keep your payment the same.
  3. You can pay down your mortgage and increase your payment – taking advantage of both options to avoid a big hit to your cash flow or savings.

Trigger Point

The trigger point is when the balance owing on your mortgage is more than the original mortgage amount. The trigger point occurs as the interest repayments take away more of the principal component of your mortgage payments once your trigger rate is surpassed.

At this point, your lender must put your mortgage back on track by having you exercise one of these options:

  1.  Principal prepayment to cover the ballooned principal balance.
  2. Increasing your payment to compensate for the additional payment to the principal.
  3. Refinance your mortgage to increase your amortization.

Before you move ahead with any of these options, it is advised that you reach out to a mortgage expert to discuss your options before making changes to your mortgage or payment that you may need help to afford or reverse.

Open vs. Closed Mortgages

An open mortgage offers the flexibility of prepaying any amount of your mortgage anytime without a prepayment penalty. However, the compromise for having an open mortgage is that interest rates are higher to make up for the option of being able to pay it off at any time. Lenders price this option higher to account for the loss in possible interest if the borrower should payout or transfer the mortgage sooner than expected.

The interest rate is more attractive on a closed mortgage as your annual prepayment privilege limits you. Your prepayment is limited to a percentage approved on your original mortgage amount. And if you pay more than your annual limit, you’ll receive a prepayment penalty – calculated similarly to if you pay off your mortgage before maturity.  It is important to weigh the benefits and their suitability to your borrowing needs before deciding on a mortgage rate, term or type.

Learn About Rates & Mortgages

Welcome to our Frequently-Asked Questions (FAQ) section, where we answer the most popular questions our nesto mortgage advisors receive daily, designed to help you make informed mortgage decisions whenever you need a new mortgage or renew/refinance an existing one.

On the hunt to learn more about 3-year variable-rate mortgages? Here are some of Canadians’ most commonly asked questions in 2024 about this hugely popular mortgage term.

What are today’s mortgage rates?

The best 3-year fixed and 3-year variable mortgage rates are and . Mortgage rates vary depending on different factors such as the borrower‘s credit, the property for which is being used as collateral, the borrower’s income capacity (to service the debt), the borrower’s capital (in the form of savings/investments and down payment), and most importantly, conditions. Conditions such as the purpose of the loan and the loan-to-value (LTV) ratio – these two conditions will have the most impact on the rate.

What is a 3-year variable mortgage rate?

Unlike a fixed-rate mortgage, which remains the same throughout the term of a mortgage, a variable mortgage rate fluctuates over the term. With a 3-year variable rate mortgage, your rate will change according to the Prime Rate plus a certain amount, as set at the beginning of your contract by your lender.

How are 3-year variable rates set?

Generally, variable-rate mortgages are set according to the Bank of Canada’s baseline interest rate. ​If the BoC’s interest rate rises or falls, nesto’s Prime Rate will likely rise or fall, and your rate will change accordingly. It’s important to note that with a variable rate mortgage, while the Prime may change, your rate’s relationship to the Prime will remain the same. 

This way, variable rates generally respond to the BoC’s baseline interest rate over time. If baseline interest rates go up, your nesto’s Prime rate will likely go up, and subsequently, your rate – since it is Prime, plus a certain marginal amount added on by your lender at the start of your mortgage term.

How often are nesto’s mortgage rates updated?

Our best rates are updated regularly each time there is a change in the pricing of rates from capital markets. Capital markets is a broad term for the secondary money market where buyers and sellers exchange investments and debt instruments.

nesto can accomplish this thanks to our capital markets division, tasked with finding the best mortgage rates for our clients, and our advanced technology, which empowers us to ensure you always have the latest rate information at your fingertips. We also want to be transparent from the beginning, so the rate you see is the rate you get.

What are the differences between fixed and variable rates?

A variable rate means the interest rate can fluctuate for the duration of your mortgage term according to changes in the lender’s Prime rate. A fixed mortgage rate, on the other hand, remains the same throughout your term.

Variable rates are based on an underlying benchmark rate or index and are set by your lender – as nesto. A primary advantage of variable rates is that you can pay less than you would with a fixed rate when variable rates are low. For example, suppose the government lowers its key interest rate. In that case, people with variable rates will likely see their costs decrease since their mortgage rate is closely related to underlying interest rates. Variable rates are less risky than a fixed rate for your lender and are, therefore, often significantly cheaper when rates are lower.

While variable-rate mortgages are chosen for their flexibility and the lower total cost over time, they are chosen for their security and predictability since payments will remain the same throughout your term on a fixed-rate mortgage. One major drawback of a variable rate mortgage is that if rates increase, so make your mortgage payments.

Is it a good idea to refinance a 3-year variable mortgage?

If you’re currently on a 3-year variable mortgage rate or want to know more about refinancing if you choose this type of mortgage, it’s essential to ask yourself why you’re refinancing. 

With all mortgage refinances you’ll need to weigh the costs involved, such as prepayment penalties and other fees for setting up a new mortgage. Ultimately, refinancing a variable mortgage can be a good idea if you can secure a better rate and the long-term savings outweigh any short-term costs.

Why compare 3-year variable rates with nesto?

We help you get the best variable mortgage rates on the market, and our trained mortgage professionals can help you find the best solution for your needs. With nesto, not only can you find the best variable rates available, but you can also get the support you need to make the right choice for your mortgage.

If I see a 3-year variable mortgage rate I like, how do I lock it?

If you’ve found a variable rate for a 3-year mortgage term that you like, the next thing to do would be to contact your nesto mortgage advisor and submit an application once you understand all the particularities. While your rate is important, the specific options and conditions related to your mortgage (like prepayment privileges) are also essential to understand fully. Make sure to make an informed decision about what’s involved with your chosen mortgage before locking into a rate you like.

Suppose you’re still looking for a 3-year variable rate mortgage. In that case, you can compare the best variable rates available or get started by getting a quote based on your current financial situation and the kind of home you want to buy, refinance, or renew.

What drives changes in 3-year variable mortgage rates?

While fixed rates remain the same for a mortgage term, variable rates change according to a benchmark set by the lender. This is generally based on the Prime Rate plus or minus a certain amount. 

When the Bank of Canada’s Key Rate changes, the benchmark usually moves in the same direction. This is because the lender now has to pay more (or less) to cover the cost of the capital used to fund your mortgage. Hence, variable rates will likely rise if the BoC’s key rate rises.

Which type of variable rate is better?

While it is a personal choice if you prefer an adjustable versus a variable mortgage, your choice will be influenced by the trajectory of rates in the current market, your risk appetite due to that trajectory and, of course, the need/use for that mortgage. 

For instance, if you’re using this mortgage to purchase a rental/investment property, you may want a variable-rate mortgage as your interest will increase. You can have more interest to write off against your rental income. 

The variable rate mortgage type that suits you depends on your risk and situation. Many clients holding a mortgage for an investment property may decide to keep the interest portion of their mortgages higher than the principal portion. Interest paid for investment purposes may be used to reduce the overall taxable (rental) income.

For an investment property where the borrower’s goals, risk appetite, and cash flow allow, it may be prudent to choose a VRM.

In most cases where the mortgage is used for a principal residence or their goal is to pay off the mortgage sooner, it may be wiser to choose an ARM.

Is a variable rate better than a fixed rate?

A variable rate mortgage has proven to save borrowers more money than a fixed rate over time. Every borrower’s circumstances and goals differ; therefore, an advisor should thoroughly discuss all current financial restraints and future considerations before deciding on the most suitable 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 or fixed rate is a question of personal choice and risk appetite. We 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.

For a first-time home buyer (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 most significant 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.

How nesto works

At nesto, all of our commission-free mortgage experts hold concurrent professional designations from one or more provinces. 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 is 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 low rates using the fintech industry’s best-in-class and safest technology to provide a 100% digital online experience and process to reduce 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 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.

Reach out to our licensed and knowledgeable mortgage experts to find your best mortgage rate in Canada.

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