Best 3-year fixed mortgage rates
What are 3-year fixed mortgage rates?
What is better, a 3-year or a 5-year fixed mortgage rate?
What bank offers the best 3-year fixed mortgage rate?
Can you get a 3-year mortgage term?
Compare current mortgage rates across the Big 5 Banks and top Canadian lenders. Take 2 minutes to answer a few questions and discover the lowest rates available to you.
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Jamie David, Sr. Director of Marketing and Mortgages
While 3-year mortgage terms are historically not very common in Canada, as a result of the rapidly rising rate environment that we saw throughout 2022 and into 2023, 3-year fixed-rate mortgages have seen a surge in interest. Spooked by high rates and market volatility, many home buyers and homeowners are wondering whether they might not be better off with a 3-year fixed-rate mortgage to help them ride out these uncertain times. Here's what you need to know to help decide whether a 3-year mortgage is right for you.
3-year fixed mortgage rates: Quick facts
- Mortgage rate is fixed over a 3-year term
- Just under 3% of all mortgage requests made on Ratehub.ca in 2022 were for 3-year fixed mortgages
- Nearly 6% of all mortgage requests made on Ratehub.ca in 2022 were for short-term fixed mortgages with terms of 4 years or less
- 3-year fixed mortgage rates closely follow 3-year government bond yields
Choosing a 3-year fixed-rate mortgage
A 3-year fixed-rate mortgage falls into the category of short-term mortgages, generally defined as mortgages with a term of less than 5 years. Such mortgages only account for a small fraction of all mortgages in Canada, but interest has grown considerably over the past several months.
Over the course of 2022 and into early 2023, in response to soaring inflation, the Bank of Canada raised the target for the overnight rate by 4.25%, from 0.25% at the beginning of 2022 to 4.50% today. This sent variable mortgage rates soaring, while fixed mortgage rates climbed as well due to inflation causing bond yields to rise rapidly. Faced with a high rate environment and instability brought about by factors such as bank failures in the United States and abroad, many homeowners and home buyers want the security of a fixed rate without being locked in for too long. Given that experts believe mortgage rates are likely to have peaked and will go down in 2024 and 2025, selecting a 3-year fixed-rate mortgage is a reasonable choice if you want to protect yourself until the situation stabilizes and rates are lower.
Of course, you must also take into account your own personal circumstances when deciding on a mortgage term. Think about what life events you may have on the horizon, such as a move or a job change. Do you need a little flexibility combined with a little stability? If so, a 3-year fixed-rate mortgage just might be right for you.
3-year fixed vs. longer-term mortgage rates
3-year fixed rates are typically slightly lower than rates on longer terms (like 5 or 10 years) and higher than rates on short terms, like 1-year rates. This is because longer fixed-rate terms lock in a lower rate for a longer period of time. That might be great for you, but it puts the risk of a rate rise onto your lender. The higher rate is, therefore, a premium for locking in a lower rate for longer.
These relationships aren't always constant, however, especially in very low or high rate environments. You should always decide which term is best for you based on the current market and your present circumstances.
3-year mortgage rates vs. other term lengths (interactive graph)
Historical 3-year fixed mortgage rates
By examining mortgage rates over time, you’ll get a good sense of which mortgage terms attract lower rates. A historical perspective also makes it easier to understand whether rates –- in this case, 3-year fixed mortgage rates –- are currently higher or lower than they have been in the past.
Here are the lowest 3-year fixed rates in Canada of the year for the last several years, compared to several other types of mortgage rates.
Source: Ratehub Historical Rate Chart
What drives changes in 3-year fixed mortgage rates?
Fixed mortgage rates follow government bond yields, with 3-year fixed rates following 3-year government bond yields. Bond yields are driven by economic conditions, and the spread between bond yields and lender-posted mortgage rates vary by a lender's marketing strategy and general credit market conditions.
Jamie David, Director of Marketing and Head of Mortgages
Jamie has 15+ years of business and marketing experience. She contributes her mortgage expertise to The Globe and Mail and authors Ratehub’s mortgage and homebuying guides. read full bio