5-year variable mortgage rates in Canada
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Ratehub.ca Insights: Bond yields have ended the work week in the 3.3% range, putting downward pressure on fixed mortgage rates. Getting a pre-approval is recommended when shopping to lock in a rate for up to 120 days. Variable rates are stable.
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5-year variable rates: Frequently asked questions
What is the best 5-year variable mortgage rate in Canada?
As of June 17, 2024, the best high-ratio, 5-year variable rate in Canada was 5.7%. To see today's rates, visit our rate table to see the 5-year variable mortgage rates offered by Canada’s Big Banks and top lenders.
To get a personalized mortgage quote, click on the preceding linkand enter some basic information (i.e. down payment amount, purchase price, location) so we can give you a more accurate quote within 2 minutes.
Why did variable rates go up so much in 2022 and 2023?
Variable mortgage rates are directly correlated with the Overnight Lending Rate set by the Bank of Canada, which in turn sets the benchmark for the Prime rate in Canada. The latter is then used by consumer lenders when setting the pricing of their variable mortgage rates.
The Overnight Lending Rate was increased aggressively by the BoC over the last two years; the central bank increased this target rate seven times in 2022, and an additional three times in 2023, bringing the total to a historic 10 rate hikes – the steepest monetary policy tightening cycle in Canada’s history. In all, the increases brought the BoC’s rate from its pandemic-era low of 0.25%, to 5%, where it remains today. As a result, Canada’s prime rate is currently 7.2%.
As variable mortgage rates are calculated as a discount from the prime rate, lenders responded to these increases by raising variable mortgage rates in kind; according to Ratehub.ca’s historical rate database, the lowest five-year variable mortgage rate available in 2022 was 0.89%. In sharp contrast, that has increased to 5.95% as of early 2024.
These rate hikes were in response to rampant inflation growth, which soared to a 40-year high of 8.1% in June 2022. This was mainly due to price increases as a result of the supply-chain challenges that had built up during the pandemic, as well as renewed consumer demand for dining, travel, and other services. The latest inflation report from Statistics Canada indicates inflation growth came in at 3.1% in November – promising progress, but still higher than the 2% target range desired by the BoC.
Will variable mortgage rates go down in 2024?
Variable mortgage borrowers will be relieved to know that lower mortgage rates are finally here! With the Bank of Canada having implemented a rate cut of -0.25% at its most recent announcement on June 5 – its first rate cut since March 2020 – Canada’s prime rate dropped from 7.2% to 6.95%. In consequence, the prime rates of banks across the country and their variable mortgage rates fell almost immediately. While it’s impossible to predict rate direction with certainty, most market observers are predicting another rate cut in July, barring any major surprises.
In commentary released on July 5, 2024, the BoC’s Governing Council wrote that inflation had been steadily declining for several months, while GDP numbers were weak, justifying the rate cut. It noted that the most recent CPI reading from April came in below expectations at 2.7%. While the Bank reaffirmed its commitment to restoring price stability for Canadians, it is highly likely that, should inflation keep trending downwards, we’ll see more rate cuts in 2024.
As long as current trends persist, it’s likely the central bank will keep cutting rates over the rest of 2024 and into 2025, perhaps by as much as 200 basis points, spread over five to six rate cuts. Should that materialize, Canada’s prime rate and lenders’ variable mortgage rates will be cut further in response.
Should I switch my variable-rate mortgage to a fixed-rate mortgage if the prime rate increases?
You may be thinking about locking in a fixed rate because the prime rate increased throughout 2022 and 2023, and your variable rate has moved higher. However, it’s important to note that fixed rates have been increasing significantly as well. Therefore, you have to choose between a variable or fixed rate based on the current rate environment and your decision should come down to your appetite for risk and your household finances.
The Bank of Canada reduced its target for the overnight rate from 5.00% to 4.75% at its last announcement on April 10, citing steadily falling inflation and a stalled economy as its primary reasons for doing so. In its accompanying commentary, the Bank reaffirmed its resolve to tamp inflation down to its 2% target, but struck an optimistic tone about being able to do so.
Before switching your mortgage, the main thing to consider is the spread between your current variable rate and the best fixed or variable rate you can get today.
Read: Should you switch from a variable-rate to a fixed-rate mortgage?
Read:Think mortgage rates will drop? The argument for getting a variable rate now
If the spread between your current rate and the best rate you can get today is greater than the amount by which you believe the prime rate will increase for the rest of your mortgage term, then you may end up saving more by keeping your current variable rate.
If the discount to prime of the best variable rate you can get today is bigger than your current variable rate, then switching to a new variable rate may afford you more savings and provide a greater cushion against further rate increases.
If you believe that you can save more money by breaking your current variable rate, make sure to account for the cost of breaking your mortgage. You can use Ratehub’s penalty calculator to help you estimate this cost.
Lastly, if your biggest concern is the change to your monthly mortgage payments, there are some lenders who offer variable rates with “fixed” mortgage payments that do not change during the term. In such cases, when prime goes up, your monthly payment remains the same but the percentage of your payment that goes towards your principal decreases. This means that more of your payment goes towards paying the increased interest and ultimately it may take you longer to pay back your mortgage amount in full. That said, you should be aware that these types of mortgages are subject to hitting what is known as the trigger rate, wherein your payments are no longer going to the principal, and may not even be covering the costs of interest in full. Once this happens, you go into what’s called ‘negative amortization’, where you are actually losing equity that you’ve built up in your home. This can lead to you reaching your trigger point, where your payments are so much less than even the cost of interest on your mortgage loan that you need to increase them. Trigger points vary from lender to lender, and are spelled out in your mortgage contract.
Is it worth getting a variable-rate mortgage?
Whether or not a variable-rate mortgage is right for you depends on your risk tolerance as a borrower. Because variable-rate borrowing product rates are determined as either a plus or minus from the Prime rate, they fluctuate whenever the Bank of Canada makes a change to its trend-setting Overnight Lending Rate. This means it’s possible that a borrower would see their interest rate and their payment increase over the course of their mortgage term, should the Bank of Canada hike its rate during that time frame. As well, variable borrowers who have a fixed-payment schedule would see less of their payment go toward their principal mortgage loan in this scenario, which could put them at risk of hitting their trigger rate, and their mortgage negatively amortizing.
With the BoC having now carried out its first rate cut in over four years on June 5, the strong current consensus among investors and market analysts is that the BoC will implement further rate cuts through the latter half of 2024, and throughout 2025. Some forecasts have called for as many as five to six cuts before the BoC is through, totalling 200 basis points. While it’s impossible to know for sure that rate cuts will materialize as expected, borrowers who are willing to absorb the risks associated with variable rates may enjoy lower rates in the near future.
Variable mortgage rate products also offer greater flexibility; unlike fixed-rate mortgages, which incur a hefty interest-rate-differential penalty when broken, a variable-rate mortgage term can be ended before renewal time for just three months’ of interest. Most mortgage lenders can also convert an existing variable rate into a fixed-rate option at the borrower’s request, without penalty.
Also read: Think mortgage rates will drop? The argument for getting a variable rate now
What impact do elevated variable rates have on the stress test?
Variable mortgage rates remain high from a historical perspective, which in turn increases the mortgage stress test threshold borrowers must prove they can pass when qualifying for a mortgage.
- the qualifying rate (currently 5.25%), or
- your contract rate + 2%
As of June 7, 2024, the lowest 5-year variable rate available in Canada is 5.70% and the lowest 5-year fixed rate in Canada is 4.74%. As such, both variable rates and fixed rates are now stress tested using your contract rate +2% as this will always end up being higher than the current qualifying rate of 5.25%. Today’s mortgage stress test starts in the mid-7 - 8% range for many borrowers.
What is Canadian Lender and Big 6 Bank?
On our rate comparison tables, Ratehub.ca features generic brands like “Canadian Lender”. The “Canadian Lender” rate represents the lowest rate our brokerage can offer among the different lenders we work with. This means that this rate can be from a Big Bank, trust company, or lending company. The reason we do not advertise the rate under the name of the actual lender offering it, is because the rate is only available through our brokerage, via a special volume discount or promotion.
Similarly, “Big 6 Bank” is another generic provider that is used to advertise the lowest Big Bank rate that the Ratehub.ca brokerage can offer.
5-year variable rates vs. 5-year fixed rates
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A guide to 5-year variable mortgage rates
June 5, 2024 Bank of Canada announcement update
On June 5, 2024, the Bank of Canada lowered its target for the overnight rate by -0.25%, taking it from 5.00% to 4.75%. This marks the first rate cut implemented by the central bank since March 2020.
- The Bank of Canada indicated that the continuous decline of inflation drove its decision to cut its benchmark rate. April’s Consumer Price Index (CPI) came in at 2.7%, below expectations, while “core” trim and median measures of inflation have fallen to 2.6% and 3.2%, respectively.
- This is the announcement that Canadians with variable-rate mortgages and home equity lines of credit (HELOC) have been waiting for, as their rates and payments will finally begin to decrease.
- Fixed mortgage rates are not tied directly to the Bank of Canada’s rate decisions, but rather to the bond market. In anticipation of a potential rate cut, however, bond yields had fallen about 30 basis points in the days leading up to the announcement. Now that the rate cut is official, we can expect lenders to begin lowering their fixed mortgage rates.
- It will be interesting to see whether this announcement has a significant impact on the Canadian housing market, which has been lacklustre this spring. Although the cut is only 0.25%, the psychological aspect of entering a falling rate environment might be enough to incite some would-be home buyers to come off the sidelines. This, in turn, could spur others to join, lest they miss out on the best options.
May 2024: Mortgage market update
After a bumpy start to 2024 for the Canadian housing market, we are seeing preliminary indicators that sales activity will gather pace, improving as expectations grow for a rate cut from the Bank of Canada as early as the summer. Bond yields continue to be on a roller coaster ride, as a jumpy bond market reacts to various data reports from Canada, the United States, and beyond. After a brief respite in December and January where bond yields tumbled, they’ve now risen to the upper 3% range in large part due to nervous investors spooked by the US Federal Reserve’s “higher for longer” rate stance. Both fixed and variable mortgage rates are currently historically high. If you’re looking to get a mortgage rate in Canada, read on for some economic information you should know.
- Real estate update: On May 15, 2024, the Canadian Real Estate Association (CREA) came out with the latest housing market figures for the month of April 2024. The most recent numbers indicate that the Canadian housing market is relatively quiet in what’s normally a busy spring season. Home buyers are still largely biding their time until expected rate cuts later this year, and the 37,745 homes that changed hands across Canada represent a -1.7% decline from the previous month’s total (despite being up by 10% on an annual basis). New listings nearly doubled sales, with a total of 70,346 residential properties coming to market, which in turn caused the sales-to-new-listings ratio (SNLR) to loosen to 53.4% (down from 57.4% in March). CREA uses the SNLR to gauge competition in the marketplace, with 45-65% indicating a balanced market, with above and below that range indicating sellers’ and buyers’ markets, respectively. Still, this new supply was not enough to prevent price growth on a monthly basis - the average home price in Canada stood at $703,446 in April, up from $698,720 in March, but down by -1.8% year over year.
Read mo
re: National home sales fall in April as buyers stick to the sidelines - CPI update: The latest Consumer Price Index (CPI) reading from Statistics Canada for the month of April saw headline inflation come in at 2.7%, -0.2% below the previous month’s reading, and the lowest CPI reading that we have seen since March 2021. Moreover, this marks the fourth month in a row in which Canada’s CPI has fallen within the central bank’s target range of 1 - 3%. Falling inflation can be linked in large part to declining food prices, which came in at 1.4%, down from March’s 1.9%. However, April also saw a 6.1% rise in gas prices. Nevertheless, shelter costs remain the largest contributor to inflation, with mortgage interest costs rising by 24.5% annually, and rents rising by 8.2% annually. In sum, though, this is good news for the Bank of Canada. Two of the key metrics used when tracking inflation, CPI Median and CPI Trim, fell to 2.6% and 3.2% in April, respectively. With this latest CPI report, markets are now pricing in a 50% chance that the Bank of Canada will cut its target for the overnight rate at its upcoming announcement on June 5, 2024.
Read more: Canadian CPI comes in at 2.7% in April
2024 Housing market forecast
Taking into consideration expectations of rate cuts and bottled-up buyer demand, CREA has updated its forecast for 2024 and 2025.
The organization projects that some 492,083 residential properties will change hands in 2024, representing a 10.5% increase from 2023. Growth is predicted to be strongest in areas where demand for homes has remained consistently robust, such as Alberta. Nevertheless, even markets that have suffered from historically low sales, among them Ontario, British Columbia and Nova Scotia, will also experience increased housing market activity. Unsurprisingly, the average home price in Canada is predicted to climb by 4.9% to $710,468 in 2024.
2025 is expected to see activity rebound even further, with a prediction that some 530,494 homes will sell by the end of the year (an annual increase of 7.8%). The average home price in Canada is projected to rise by 7% to $760,120.
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Best 5-year variable mortgage rates +
Rates updated:
| Rate | Term | Type | Provider |
|---|---|---|---|
| 5.70% | 5 years | Variable | Canadian Lender |
| 5.85% | 5 years | Variable | Canwise |
| 5.90% | 5 years | Variable | CMLS Financial |
| 6.00% | 5 years | Variable | Big 6 Bank |
| 6.00% | 5 years | Variable | First National |
5-year variable mortgage rates: Quick facts
- Variable mortgage rates fluctuate with the prime lending rate.
- Variable rates are typically stated as "prime plus or minus a percentage".
- Some 5.36% of all mortgage requests made to Ratehub.ca from January - December 2023 were for 5-year variable-rate mortgages.
- 5-year fixed mortgage rates are driven by 5-year government bond yields.
- 23% of consumers opted for a variable-rate mortgage in 2024, down from 27% in 2023. (Source: 2024 CMHC Mortgage Consumer Survey)
Historical 5-year variable mortgage rates
Checking historical mortgage rates is a great way to properly understand which mortgage terms attract lower rates and whether rates are especially high or low at any given moment. Here are the lowest 5-year variable rates of the year in Canada for the last several years, compared to several other types of mortgage rates.
Source: Ratehub Historical Rate Chart
The popularity of 5-year variable mortgage rates
Although fixed-rate mortgages are more popular, according to Mortgage Professionals Canada, 25% of Canadian mortgage-holders had variable-rate mortgages at the end of 2022, making it the second most popular type of mortgage.
Historically, fixed rates are generally more popular, however, in the wake of the COVID-19 pandemic, the Bank of Canada cut its target overnight lending rate in March 2020, which caused the prime rate to go down. As a result, variable-rate mortgages experienced a surge in popularity; as mentioned above, roughly 25% of all mortgages in Canada at the end of 2022 were variable-rate mortgages, in contrast to 20% in 2019. However, as variable-rate mortgages have climbed to rates significantly higher than fixed-rate mortgages in the wake of multiple Bank of Canada rate hikes over the course of 2022, their popularity has waned considerably in 2023. While some 26% of all rate inquiries to Ratehub.ca in 2022 were for 5-year variable rates, they accounted for just 5.36% of all rate requests to Ratehub in 2023. Moreover, according to the 2024 CMHC Mortgage Consumer Survey, 23% of consumers opted for a variable-rate mortgage in 2024 (down from 27% in 2023). The table below, sourced from the same survey, shows the popularity of fixed-rate mortgages in 2024 among the four main categories of people who contracted mortgages.
| First-time home buyers | Repeat buyers | Renewers | Refinancers |
| 20% | 21% | 22% | 28% |
A 5-year mortgage term is the most popular duration. It sits right in the middle of available mortgage term lengths, between one and 10 years, and, thus, its popularity reflects a risk-neutral average. It also tends to be heavily promoted by major lenders. A further breakdown of mortgage terms shows that about 80% of mortgages have terms of five years or less.
What drives changes in 5-year variable mortgage rates?
As previously mentioned, the 5-year variable mortgage rate will fluctuate with any movements in the prime lending rate, which is the rate at which banks lend to their best and most credit-worthy customers. The variable mortgage rate is typically stated as prime plus/minus a percentage discount/premium.
Canada’s prime rate is influenced primarily by economic conditions. The Bank of Canada adjusts it depending on the state of the economy, determined by various factors in employment, manufacturing, and exports. Together, these shape the inflation rate. When inflation is high, the Bank of Canada must act to avert an over-stimulated economy. They will increase the prime rate to make the act of borrowing money more expensive.
Conversely, in cases where inflation is low, the Bank of Canada will decrease the prime rate to stimulate the economy and improve the attractiveness of borrowing. The discount/premium on the prime rate applied to the variable mortgage rate is set by the banks, based on their rate strategy and desired market share.
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The bottom line: Should you get a 5-year variable rate?
As long as you're comfortable with risk and understand that variable rates can fluctuate throughout your term, then a 5-year variable rate is a reasonable choice. Since variable rates do have the inherent risk of rate increases, make sure you have enough money in your budget to cover a higher mortgage payment if rates increase.
If you're still not sure about what mortgage product is right for you, it's a good idea to speak to a mortgage broker. Consultations are free, and you'll leave with expert advice, personalized to you.
For more information, check out these helpful pages!
- Best Mortgage Rates in Canada
- 5-Year Fixed Mortgage Rates
- Variable or Fixed Mortgage Rates
- Amortization
- Mortgage Term vs. Amortization
- Is a 5-Year Fixed-Rate Mortgage Term Right For You?
- Porting and Assuming Your Mortgage
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