Are you looking to buy your first home in Canada? Or perhaps you’re a current homeowner looking to refinance your existing mortgage? In either case, you need to stay informed about the current mortgage rates in Canada.
In this comprehensive blog post, we will highlight the current mortgage rates offered by different Canadian banks, unravelling the complexities and shedding light on the factors that influence them. From the role of the Bank of Canada and the economy in shaping interest rates to the different types of mortgages available, we’ll cover it all.
If you’re a first-time homebuyer excitedly exploring the possibilities, this guide is designed to provide you with the knowledge and insights needed to navigate the mortgage market in Canada confidently.
By the end of this blog post, you’ll be well-equipped with the knowledge to make informed decisions, potentially saving thousands of dollars over the life of your mortgage. So let’s dive in and discover how you can secure the best mortgage rates in Canada and pave the way to a brighter financial future.
Current Mortgage Rates From Canada’s Big Banks
LENDER | PRIME RATE | 3-YEAR FIXED RATE | 5-YEAR FIXED RATE |
BMO | 5.95% | 4.74% | 4.45% |
CIBC | 5.95% | 4.79% | 4.34% |
RBC | 5.95% | 4.74% | 4.44% |
Scotiabank | 5.95% | 4.64% | 4.69% |
TD Bank | 5.95% | 4.67% | 4.49% |
Mortgage rates From Other Mortgage Lenders in Canada
The table below represents the current mortgage rates in Canada for an insured 5-y:ear fixed term at $500,000.
Lender | Rate |
Alterna Savings | 4.34% |
Butler Mortgage | 4.09% |
DUCA | 4.79% |
First Ontario | 4.79% |
NBC | 4.74% |
Desjardins | 4.79% |
Laurentian | 4.34% |
Caisse Alliance | 4.69% |
Nesto | 4.09% |
Tangerine | 4.84% |
Source: Wowa
Note: Depending on your credit history and mortgage type, your mortgage rate may change occasionally.
Types of Mortgage Rates in Canada
In Canada, there are two main types of mortgage rates: fixed rates and variable rates. The type of mortgage rate you choose will significantly impact your overall mortgage costs over the amortization period.
1. Fixed Mortgage Rates
A fixed mortgage rate remains constant throughout the entire term of your mortgage. This rate type is well-suited for borrowers with a low-risk profile who prefer stability.
One of the primary advantages of a fixed mortgage rate is that it protects against sudden interest rate fluctuations. Regardless of how the market behaves, your regular mortgage payment remains unchanged throughout the entire term, providing you with predictable and steady budgeting.
2. Variable Mortgage Rates
On the other hand, a variable mortgage rate is a rate that can change in response to market fluctuations. Typically, variable rates are initially lower than fixed rates, making them attractive to borrowers with a high-risk profile and stable income.
It’s essential to note that with variable mortgage rates, your payment amount may vary over time, reflecting the changes in the market interest rates. While this uncertainty may seem daunting to some, others find it worthwhile due to the potential cost savings when interest rates are low.
It also offers flexibility. If you initially choose a variable rate but later decide you prefer the stability of a fixed rate, you can convert to a fixed rate without incurring any penalty. This flexibility allows you to align your payment plan with your current financial situation.
Types of Mortgage Terms in Canada
In the Canadian mortgage market, you’ll encounter different mortgage terms, which can be broadly grouped into short-term and long-term mortgage rates.
1. Short-Term Mortgages
Short-term mortgages typically span from three months to three years. These mortgages offer lower interest rates, but there’s a trade-off, you’ll need to renew your mortgage regularly.
The interest rate will be negotiated based on the prevailing market rates during the renewal process.
For instance, if you initially signed a 1-year term mortgage at a rate of 1.2%, and someone else signed a 10-year long-term mortgage at the same rate, your rate will likely change when renewing your 1-year term.
In contrast, the individual with the 10-year term will enjoy the same rate for the next nine years.
2. Long-Term Mortgages
Long-term mortgages come with extended amortisation periods, usually spanning 10 years or more, usually offering rate stability. When you opt for a long-term mortgage, your interest rate will be locked in for a considerable period.
This means that even if interest rates fluctuate in the first year after signing your 10-year term, you will be exempt from any increase.
However, long-term mortgages also carry a potential risk. While short-term mortgages expose you to the possibility of sudden interest rate increases, long-term mortgages may miss out on the opportunity to benefit from a decrease in mortgage rates.
For example, if you commit to a 10-year long-term mortgage at a 5.3% rate, you won’t be able to change it, even if mortgage rates drop in the first year of your term. You will be locked into the 5.3% rate for the entire duration of your 10-year mortgage term.
How to Choose a Mortgage Term in Canada
Choosing the right mortgage term in Canada can be daunting, with the dilemma of short-term versus long-term options. A short-term mortgage boasts a lower interest rate, while a long-term mortgage offers an extended amortization period and rate stability.
The good news is, there’s no one-size-fits-all answer; it all depends on your unique situation. To make an informed choice, it’s essential to understand when each mortgage term is most suitable.
Opting for a short-term mortgage proves beneficial if you plan to sell your property shortly. Doing so can avoid the penalties associated with breaking your mortgage before the term ends.
Conversely, a long-term mortgage may be the ideal fit if you desire the security of a locked-in mortgage rate for an extended period, safeguarding you against sudden interest rate increases.
To find the best term that aligns with your specific needs, it’s crucial to weigh the advantages and disadvantages of short-term versus long-term mortgages.
How To Qualify for a Mortgage in Canada
Qualifying for a mortgage in Canada is a crucial step before delving into the realm of the best mortgage rates. Whether you’re a first-time homebuyer or seeking a mortgage renewal, understanding the factors determining your eligibility for the best rate is vital.
- Maintain a Good Credit Score: A solid credit score is essential for mortgage eligibility in Canada. Scores of 680+ are considered ideal for accessing the best mortgage rates and quicker approvals. If your score falls below 680, say around 560+, you may still qualify for higher interest rates. For scores below 600, private mortgage lenders like Home Trust or Equitable Bank may be options to explore.
- Provide Proof of Income: Demonstrating a stable income is another essential requirement for mortgage eligibility in Canada. Lenders typically require proof of income, such as pay stubs or tax documents. Additionally, most lenders prefer applicants who have been employed in their current position for at least one year.
- Pass a Mortgage Stress Test: Lenders employ a mortgage stress test to assess your capacity to manage higher-interest mortgage payments, known as the qualifying rate. For instance, if you are approved for a 3.5% mortgage rate, a lender may test your ability to handle payments at a qualifying rate of 6%. Passing this stress test is crucial to securing your desired mortgage.
Factors That Determine Mortgage Rates in Canada
In Canada, mortgage rates can vary significantly for individual borrowers based on several key factors. Understanding these factors is essential as they are crucial in determining the interest rate you qualify for. Let’s explore these factors that influence mortgage rates in Canada.
1. Mortgage Type: The type of mortgage you seek directly impacts the interest rate you’ll be offered. Generally, when purchasing a new home or going for a mortgage renewal, you can secure a lower interest rate than refinancing. It’s essential to be cautious when considering refinancing, as it may increase your mortgage rate.
However, if you have an existing mortgage with enough equity, you may have access to a low mortgage rate home equity line of credit (HELOC).
2. Down Payment: The amount of down payment you can put towards your property also plays a significant role in determining your mortgage rate. If you make less than a 20% down payment, you’ll likely be required to obtain Canada Mortgage and Housing Corporation (CMHC) insurance. While this allows you to purchase a property with a smaller down payment, it typically results in a slightly higher mortgage rate.
Additionally, having CMHC insurance on your mortgage could affect your eligibility for a low mortgage rate when it’s time for mortgage renewal.
3. Amortization Period: The amortisation period refers to the duration over which you’ll pay off your entire mortgage. If you can make a down payment of at least 20%, you’ll be eligible for a more extended amortisation period. While a longer amortisation period leads to lower monthly payments, it also comes with a higher mortgage rate than a shorter amortisation period.
4. Property Usage: Lastly, how you intend to use the property can also influence your mortgage rate in Canada. Generally, residential properties attract lower mortgage rates compared to commercial properties. So, if you’re seeking a mortgage for a residential property, you may have the opportunity to secure a more favourable interest rate.
How to Lower Your Mortgage Payment in Canada
Securing the best mortgage rate in Canada is just the beginning; learning how to reduce your mortgage payment further can lead to even greater savings. Here are three practical ways to achieve this:
- Opt for a Lower Mortgage Rate: Choosing a lower mortgage rate is the most effective means of reducing mortgage payments. Whether you prefer a fixed or variable rate, a mortgage broker can skillfully negotiate for a more favourable option.
- Increase Your Down Payment: Making a larger down payment than the minimum requirement can significantly lower the overall cost of your mortgage payment. A lower down payment might lead to a longer amortization period, resulting in higher interest payments over time.
- Consider Making Prepayments: If your income allows, making prepayments can lead to substantial savings on your mortgage. It’s essential to be aware that some agreements may entail a penalty for prepayment.
Depending on your financial situation, you can choose to prepay a portion or even the entire mortgage. Taking up a side hustle is an excellent way to generate extra income to put towards your mortgage repayment.
In fact, there are numerous ideas for earning extra income from the comfort of your home or online. The key is to find an approach that aligns with your unique circumstances.
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- Neo Mortgage Review (2024): Fast Digital Mortgage
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- Best Credit Union Mortgage Rates in Canada (2024)
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Final Thoughts on the Best Mortgage Rates in Canada
I hope you now feel empowered and well-equipped to make the best decisions for your financial future. Understanding the factors influencing mortgage rates and the strategies to secure the best deals is key to saving thousands over the life of your mortgage.
So, remember that knowledge is your greatest asset, whether you’re a first-time homebuyer eager to step into the Canadian property market or a current homeowner seeking to optimize your mortgage.
Take advantage of the valuable information shared here to unlock the doors to better rates and a brighter financial outlook.
FAQs on the Best Mortgage Rates in Canada
Does Canada Have 30-Year Fixed Mortgage Rates?
Yes. However, 25-year amortisation periods are more popular than 30-year fixed mortgage rates in Canada.
Is a Fixed or Variable Mortgage Better?
A fixed mortgage rate is better if you can’t bear sudden interest fluctuations. However, a variable mortgage could be your best option if you want a lower but unstable mortgage rate.
How Can I Calculate My Mortgage Payments?
This Mortgage Payment Calculator shows you your payments and amortisation for any rate(s) you find on this website. You can even assume lump-sum prepayments to estimate how much faster you’ll be able to pay down your loan.
Why Should I Compare Mortgage Rates?
Comparing mortgage rates will help you choose the best rate that suits your situation. When you compare mortgage rates, you will know the market’s low and high mortgage rates.
