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5-year variable mortgage rates in Canada

To see mortgage rates for other terms and types, click on the filters icon beside down payment percentage. Insights: Fixed mortgage rates were unchanged overnight as bond yields remain in the 3.6% range. Getting a pre-approval is recommended to hold today's fixed rates for up to 120 days. Variable rates are stable.

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WATCH: June 7, 2023 Bank of Canada Announcement

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5-year variable rates: Frequently asked questions

What is the best 5-year variable mortgage rate in Canada?

How much did variable rates increase in 2022?

Why did variable rates go up so much in 2022?

Should I switch my variable-rate mortgage to a fixed-rate mortgage if the prime rate increases?

What impact do rising variable rates have on the stress test?

Will variable rates continue to go up in 2023?

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5-year variable rates vs. 5-year fixed rates

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A guide to 5-year variable mortgage rates

Jamie David

June 2023 mortgage market update

We’ve been seeing a lot of volatility in the Canadian mortgage market of late, in large part due to yet another rate hike by the Bank of Canada at its last announcement on June 7 - the ninth since March 2022. Bond yields have consequently spiked as well. Here are some key points that today’s mortgage shopper needs to know about: 

  • CPI update: The Bank of Canada monitors inflation like a hawk, as it is the primary measure that determines the Bank’s monetary policy. The Bank of Canada uses its policy rate (also known as the benchmark rate or Overnight Lending Rate) to control inflation. If inflation is too high, as it has been ever since the ending of pandemic lockdowns in 2021, the Bank raises the policy rate to reduce consumer spending and borrowing behaviour. On the other hand, when the economy is slumping, the Bank lowers the policy rate to encourage spending and borrowing. The most recent Canadian consumer price index came in at 3.4% for the month of April, which was very welcome news after April’s higher-than-expected 4.4%. It provides clear evidence that the Bank’s aggressive rate hiking strategy is proving effective, and has many questioning whether the Bank of Canada will resume its rate hold strategy from earlier in the year. Other experts are not convinced, and still expect an additional 0.25% increase to the policy rate in July. Should this come to pass, the benchmark rate will increase from today’s 4.75% to a full 5%, and variable rates can be expected to rise almost immediately in response.    
  • Bond market update: Unlike variable rates, fixed rates are not directly influenced by the Bank of Canada’s policy rate; rather, they are tied to bond yields, which have been on a rollercoaster ride in 2023 so far as jumpy markets and investors react to any sign of an imminent recession or a rate hike by the Bank of Canada. Most recently, bond yields have dropped somewhat in light of May’s promising CPI numbers, hovering around the 3.6% mark. While this reduces the upward pressure on fixed rates, it’s premature to say whether bond yields will continue going down.
  • Real estate update: Despite the elevated rate environment, May saw increased growth in the Canadian real estate market as buyers came in off the sidelines to participate in the spring selling season. The latest figures released by the Canadian Real Estate Association (CREA) on June 15 show that home sales in May increased by 1.4% year over year, and by an impressive 5.1% from the previous month. CREA’s data shows that about 70% of real estate markets across the country are on the rebound.

June 7, 2023 Bank of Canada announcement update

On June 7, 2023, the Bank of Canada raised the target for the overnight rate by 25 basis points, bringing it to 4.75%. This was the first rate hike since January 2023, marking an end to the Bank’s conditional rate hold stance.

  • Canadians with variable-rate mortgages and home equity lines of credit (HELOCs) will see their rates rise almost immediately after several months of much-needed stability.
  • With rates rising, the threshold for the mortgage stress test will rise as well. To calculate how much you can qualify for, use our mortgage affordability calculator.
  • The Bank provided detailed commentary explaining its decision to once again raise the target for the overnight rate, citing stronger-than-expected GDP growth in the first quarter of 2023 along similarly elevated April inflation figures, among other factors.
  • In its commentary, the Bank reaffirmed its strong commitment to forcing inflation down to its target of 2%, and expressed its willingness to carry out another rate hike at its next announcement on July 12 if needed. We can expect to see increased instability in the housing market as a result of this latest announcement. 

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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".
  • Just 5% of all mortgage requests made to from January - April 2023 were for 5-year variable-rate mortgages.
  • 5-year fixed mortgage rates are driven by 5-year government bond yields.

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, a Bank of Canada report showed that some 33% of all mortgages in Canada were 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 massive surge in popularity; as mentioned above, roughly a third 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 in 2022 were for 5-year variable rates, they accounted for just 5% of all rate requests to Ratehub in January - April 2023. 

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.


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