current 5 year Mortgage rates in Canada

TD Bank 5-Year Fixed Closed Mortgage

Selected for this guide

TD Bank 5-Year Fixed Closed Mortgage

The TD Bank 5-Year Fixed Closed Mortgage offers a predictable interest rate for five years, providing stability in your monthly payments. As a closed mortgage, it typically comes with restrictions and penalties for early payout or significant changes to the mortgage terms. It's a popular choice for those seeking budgeting certainty in a fluctuating rate environment.

Pros

• Fixed interest rate for 5 years provides payment stability.
• Budgeting certainty as payments remain consistent.
• Protection from rising interest rates during the term.
• Easier to plan long-term finances with predictable costs.

Cons

• Penalties for breaking the mortgage early can be substantial.
• Cannot take advantage of falling interest rates without penalty.
• Less flexibility for significant changes to mortgage terms.
• May not be the lowest rate available if variable rates are significantly lower.

View mortgage options →

Based on FCAC alerts and public lender disclosures as of June 2026, the current Canadian prime rate is approximately 7.20%, influencing variable mortgage products, while fixed-rate offerings reflect bond yields and lender risk assessments. For credit-related topics, a FICO score of ~760 is considered very good, with Equifax typically defining a good range as 660-724 based on 2026 data.

Navigating the Canadian mortgage landscape requires a clear understanding of current rates, especially for the popular 5-year fixed and variable terms. This guide provides a detailed comparison and review for Canadian readers, focusing on the total cost of borrowing, potential risks, and when certain products might be less suitable. Our analysis incorporates data from major Canadian banks, credit unions, and alternative lenders, aiming to provide an objective, non-hype perspective.

Key Features

Canadian mortgage rates, particularly 5-year terms, are a critical component of homeownership costs. The distinction between fixed and variable rates is paramount. A 5-year fixed mortgage locks in your interest rate for the entire term, providing payment stability regardless of market fluctuations. This predictability is often preferred by homeowners who prioritize consistent budgeting and want to guard against potential rate increases. Conversely, a 5-year variable mortgage rate fluctuates with the lender's prime rate, which itself is influenced by the Bank of Canada's overnight target rate. While variable rates can offer lower initial payments and the benefit of falling rates, they expose borrowers to the risk of increased payments if rates rise.

Lenders often offer various incentives to attract borrowers. These can include welcome bonuses, cash back, or reduced legal fees, though these are typically tied to specific mortgage products and terms. It's crucial to evaluate the long-term benefit of such incentives against the overall interest rate and terms of the mortgage. For instance, a slightly higher rate with a significant cash back offer might still be less advantageous over five years than a lower rate without any upfront bonus. Additionally, fees associated with mortgages can vary widely, encompassing appraisal fees, legal costs, and potential discharge fees. Transparency regarding these costs is essential for an accurate total cost of borrowing calculation.

• Fixed vs. Variable Rates: 5-year fixed rates offer payment stability; 5-year variable rates fluctuate with prime, offering potential savings or increased costs.
• Welcome Bonuses & Incentives: Cash back or reduced fees may be offered, but evaluate their value against the total cost of borrowing.
• Amortization Periods: Standard amortization is 25 years for uninsured mortgages, but can extend to 30 years with a larger down payment (20% or more).
• Prepayment Privileges: Most mortgages allow for annual lump-sum payments or increased regular payments, typically up to 15-20% of the original principal, without penalty.
• Portability & Assumability: The ability to transfer your mortgage to a new property or for a new buyer to assume your existing mortgage can be valuable but varies by lender.

Pros & Cons

Pros

• Payment Predictability (Fixed): Offers stable monthly payments for the entire 5-year term, simplifying budgeting.
• Potential for Lower Rates (Variable): Variable rates often start lower than fixed rates, offering potential savings if rates decline.
• Competitive Market: Numerous lenders vying for business can lead to better rates and incentives for borrowers.
• Flexibility Options: Many mortgages include prepayment privileges, allowing faster repayment and interest savings.

Cons

• Interest Rate Risk (Variable): Payments can increase significantly if the prime rate rises, impacting affordability.
• Prepayment Penalties (Fixed): Breaking a fixed-rate mortgage before its term ends can incur substantial penalties.
• Higher Initial Rates (Fixed): Fixed rates are often higher than variable rates at the outset, meaning you might pay more if rates remain stable or fall.
• Hidden Fees: Appraisal fees, legal costs, and discharge fees can add to the total cost if not accounted for.

How It Compares

When comparing 5-year mortgage rates in Canada, it's crucial to look beyond the advertised rate and consider the total cost of borrowing, including any fees, and the flexibility of the product. The current prime rate of approximately 7.20% makes variable rates particularly sensitive to Bank of Canada policy. While a welcome bonus might seem attractive, a slightly higher interest rate over five years can quickly negate its value. For example, a $300,000 mortgage at 5.50% versus 5.35% (s.347 criminal rate as amended 2025; max APR) will result in a difference of hundreds of dollars in interest over five years, potentially overshadowing a $1,000 cash back offer.

Here are some cost scenarios to illustrate the impact of different rates and borrowing amounts:

Cost Scenario 1: For a $300,000 mortgage with a 25-year amortization at a 5.50% fixed rate, the monthly payment would be approximately $1,833. Over the 5-year term, the total interest paid would be around $48,000. If the rate were 5.70%, the monthly payment would increase to about $1,867, resulting in roughly $50,000 in interest paid over five years. This $2,000 difference highlights the impact of even a small rate variation.

Cost Scenario 2: Consider a $500,000 mortgage with a 25-year amortization. At a 5.25% variable rate, assuming the prime rate remains stable, the monthly payment would be approximately $3,005. The total interest paid over five years would be around $82,000. If the prime rate were to increase by 0.50% over the term, raising the effective rate to 5.75%, the monthly payment would jump to approximately $3,150, resulting in over $89,000 in interest paid, a significant increase of $7,000.

Cost Scenario 3: For a $700,000 mortgage with a 25-year amortization at a 5.35% (s.347 criminal rate as amended 2025; max APR) fixed rate, the monthly payment would be approximately $4,300. The total interest paid over the 5-year term would be around $114,000. If a borrower opted for a product with a 5.40% fixed rate instead, the monthly payment would be closer to $4,220, and the total interest paid over five years would be approximately $109,000, saving $5,000 in interest over the term.

These scenarios underscore the importance of comparing not just the rate, but also the total interest paid over the term and potential payment changes, especially with variable products. Always consider your risk tolerance and financial stability when choosing between fixed and variable rates.

Who It's For

A 5-year fixed mortgage rate is ideal for homeowners who prioritize budget stability and want to lock in their housing costs. This is particularly beneficial for those with tight budgets or those who are risk-averse to interest rate fluctuations. First-time homebuyers often find comfort in the predictability of fixed payments. Conversely, a 5-year variable mortgage rate suits borrowers who are comfortable with market fluctuations and believe interest rates may decline or remain stable. These individuals typically have more financial flexibility to absorb potential payment increases and are willing to take on more risk for the possibility of lower overall interest costs. Borrowers with excellent credit scores (e.g., FICO ~760) are often eligible for the most competitive rates, regardless of their chosen product type.

How to Apply

Applying for a 5-year mortgage in Canada involves several key steps:

1. Get Pre-Approved: Obtain a mortgage pre-approval from a lender. This determines how much you can borrow and locks in an interest rate for a specific period (typically 90-120 days). This is a crucial first step as it provides a realistic budget for your home search.
2. Gather Documentation: Prepare necessary documents, including proof of income (employment letters, pay stubs, tax returns), bank statements, and details of existing debts. Lenders require comprehensive financial information to assess your eligibility and risk.
3. Shop for Rates: Compare offers from multiple lenders, including major banks, credit unions, and mortgage brokers. Look beyond the advertised rate; inquire about all fees, prepayment penalties, and flexibility options. A mortgage broker can be particularly helpful here, as they have access to a wide range of lenders and can often secure more competitive rates.
4. Submit Application: Once you've chosen a lender, submit a formal mortgage application. This will involve a hard credit inquiry, which temporarily impacts your credit score but is necessary for the approval process.
5. Legal & Closing: Work with a lawyer to finalize the legal aspects of the purchase, including title transfer and mortgage registration. Be prepared for closing costs, which can include legal fees, land transfer tax, and property adjustments.

Responsible Borrowing Tactics:

• Maintain a Healthy Credit Score: A higher credit score (e.g., FICO ~760) grants access to better rates. Paying bills on time and keeping credit utilization low are key. This matters because lenders use your credit score to assess your risk, directly impacting the interest rate you're offered.
• Save a Larger Down Payment: A down payment of 20% or more avoids CMHC insurance premiums and often unlocks better rates. This matters because a larger equity stake reduces the lender's risk and demonstrates your financial commitment.
• Understand the Total Cost: Always factor in all fees, potential penalties, and the total interest paid over the term, not just the monthly payment. This matters because focusing solely on the monthly payment can lead to underestimating the true cost of borrowing.
• Build an Emergency Fund: Having several months' worth of living expenses saved provides a buffer against unexpected financial hardships, ensuring you can meet mortgage payments. This matters because unexpected job loss or illness can jeopardize your ability to pay, leading to default.

Verdict

Choosing between a 5-year fixed and variable mortgage rate in Canada in 2026, with prime at 7.20%, hinges on your risk tolerance and financial outlook. If stability and predictable payments are paramount, a fixed-rate mortgage is the prudent choice, shielding you from potential rate hikes. However, be aware of the higher initial rate and potential prepayment penalties. If you have financial flexibility and believe interest rates might decline or remain stable, a variable rate could offer savings, but it carries the inherent risk of increased payments if prime rate continues to climb. Always conduct thorough research, compare offers from multiple lenders, and understand the full terms and conditions before committing. When in doubt, consulting a qualified mortgage professional can provide personalized guidance tailored to your specific financial situation.

FAQ

How does the Bank of Canada's prime rate affect my 5-year mortgage?

The Bank of Canada's overnight target rate directly influences the prime rate offered by commercial banks. Variable-rate mortgages are typically tied to this prime rate, meaning your payments will adjust as the Bank of Canada changes its target rate. Fixed-rate mortgages are less directly affected by short-term prime rate changes, as they are influenced more by bond yields and long-term economic forecasts.

What is a mortgage pre-approval and why is it important?

A mortgage pre-approval is a conditional commitment from a lender to provide you with a mortgage up to a certain amount at a specific interest rate. It's important because it gives you a clear budget for house hunting, demonstrates to sellers that you are a serious buyer, and often locks in an interest rate for a period (e.g., 90-120 days), protecting you from potential rate increases while you search for a home.

What are the common penalties for breaking a 5-year fixed mortgage early?

Penalties for breaking a fixed-rate mortgage typically involve the greater of two calculations: three months' interest or the Interest Rate Differential (IRD). The IRD is the difference between your current mortgage rate and the lender's current rate for a term similar to your remaining term, multiplied by your outstanding balance. These penalties can be substantial, making it crucial to understand the terms before committing.

Should I choose a fixed or variable rate with the current prime rate at 7.20%?

With a prime rate of 7.20%, the decision between fixed and variable depends heavily on your personal risk tolerance and financial outlook. A fixed rate offers payment stability, which is valuable if you anticipate further rate increases or prefer predictable budgeting. A variable rate might be attractive if you believe rates will stabilize or decrease, but it exposes you to the risk of higher payments. Assess your ability to absorb payment increases before opting for a variable product.

Does rate shopping impact my credit score?

Applying for pre-approval or a mortgage involves a "hard inquiry" on your credit report, which can slightly lower your score temporarily. However, credit scoring models typically recognize that consumers shop around for the best mortgage rates. Multiple hard inquiries for the same type of loan within a short window (e.g., 14-45 days, depending on the model) are often treated as a single inquiry, minimizing the impact on your score. It's advisable to do all your mortgage rate shopping within a concentrated period.

What is the difference between a pre-qualification and a pre-approval?

A pre-qualification is a preliminary estimate of

Ready to apply?

View mortgage options →