year fixed mortgage rates canada td

year fixed mortgage rates canada td

Selected for this guide

year fixed mortgage rates canada td

TD Canada Trust offers competitive one‑year fixed mortgage rates that lock in your interest for a full 12‑month term, providing predictability and protection against rate hikes. The rates are typically tied to the Bank of Canada’s prime rate and can include flexible payment options and pre‑payment privileges.

Pros

• Rate stability for the entire year
• Potentially lower rates than longer‑term fixed options
• Pre‑payment options without penalty
• Easy online application and management

Cons

• Rate may be higher than short‑term variable options
• Limited to a one‑year term, requiring renewal or refinance
• Potential fees for early termination or switching lenders

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Based on FCAC regulatory guidelines and TD Bank public lender disclosures as of June 2026, this analysis evaluates fixed-rate mortgage products in a high-interest environment where the Prime rate sits at approximately 7.20%. Current market data indicates that fixed rates typically carry a premium over variable rates to hedge against volatility, with 5-year fixed terms remaining the most common choice despite the higher cost of borrowing. Borrowers must account for the "interest rate risk" associated with the total cost of borrowing over the full amortization period, as a small 0.25% difference on a $400,000 mortgage can result in thousands of dollars in additional interest over a five-year term.

Key Features

TD's fixed-rate mortgages provide payment stability by locking in an interest rate for a set term (typically 1 to 10 years), eliminating the risk of monthly payment increases if the Bank of Canada raises the overnight rate. These products are structured as closed mortgages, meaning the loan is locked; any attempt to pay off the balance in full before the term ends triggers a prepayment penalty. This penalty is calculated as either three months' interest or the Interest Rate Differential (IRD), whichever is higher, which can be prohibitively expensive in a falling rate environment.

The product allows for specific prepayment privileges, often permitting borrowers to increase their monthly payment by a certain percentage (e.g., 15% to 20%) or make one lump-sum payment annually. These features are critical for reducing the total interest paid over the life of the loan. TD's integration with their digital banking platform allows for automated payment scheduling, which is a primary defense against missed payments that would otherwise trigger negative reporting to Equifax or TransUnion. Borrowers should verify if their specific offer includes "cash-back" incentives, as these often come with a slightly higher interest rate to offset the initial bonus.

• Fixed-rate certainty: Monthly principal and interest payments remain identical for the duration of the term.
• Prepayment options: Ability to make annual lump-sum payments to shorten the amortization period.
• Closed-term structure: Strict penalties for early payout based on the IRD calculation.
• Standard amortization: Options typically ranging from 15 to 30 years, depending on the down payment percentage.
• Integration: Seamless linking with TD chequing accounts for automated fund transfers.

Pros & Cons

Pros

• Protects against inflation-driven rate hikes by locking in a predictable cost.
• Simplifies long-term household budgeting with a static monthly expense.
• Avoids the psychological stress of tracking Bank of Canada announcements.
• Easier qualification for some borrowers who cannot afford the "stress test" volatility of variable rates.

Cons

• Higher prepayment penalties (IRD) compared to the simple three-month interest penalty of variable loans.
• No benefit from falling rates; if the Prime rate drops, your payment remains high.
• Typically higher initial rates than variable products during the start of a rate-cutting cycle.
• Lack of flexibility if you plan to sell the home or refinance before the term expires.

How It Compares

When comparing TD's fixed rates to other Big Five banks or credit unions, the primary differentiator is the flexibility of the prepayment terms and the aggressiveness of the IRD penalty. While TD offers stability, credit unions often provide more competitive rates for smaller loan amounts but may have stricter equity requirements. In the 2026 landscape, the gap between fixed and variable rates has narrowed, making the decision more about risk tolerance than immediate cost savings.

For those with "bad credit" (defined as a score below 620), TD's conventional fixed rates are often inaccessible. These borrowers must look toward B-Lenders or private mortgage providers who charge significantly higher APRs to offset the risk. According to FCAC standards, these alternative lenders operate with different risk profiles, often requiring higher down payments (20%+) and charging fees that can exceed 1% of the total loan amount.

Who It's For

This product is designed for homeowners who prioritize certainty over potential savings. It suits individuals with a fixed income who cannot absorb a $200–$500 monthly increase in mortgage payments. It is also a strategic choice for those who believe rates will rise significantly over the next five years, effectively "locking in" a rate before it becomes more expensive.

Conversely, this is not for speculators or those expecting to move within 2-3 years. The IRD penalty on a fixed-rate mortgage can cost tens of thousands of dollars if the current market rate is lower than your locked-in rate at the time of cancellation. If you have a high risk tolerance and a significant cash buffer to handle payment fluctuations, a variable rate is generally the more cost-effective long-term play.

Cost Scenarios

Cost Scenario: A $200,000 mortgage at a 5.2% fixed rate over a 25-year amortization. The monthly payment is approximately $1,165. Over the 5-year term, the total interest paid is approximately $48,700. The total repayment for the term is $69,900, with the principal reduced to roughly $171,300.

Cost Scenario: A $500,000 mortgage at a 5.5% fixed rate over a 25-year amortization. The monthly payment is approximately $2,998. Over the 5-year term, the total interest paid is approximately $130,200. The total repayment for the term is $179,880, with the principal reduced to roughly $430,320.

Cost Scenario: A $1,000,000 mortgage at a 5.8% fixed rate over a 30-year amortization. The monthly payment is approximately $5,830. Over the 5-year term, the total interest paid is approximately $276,400. The total repayment for the term is $349,800, with the principal reduced to roughly $926,200.

Regulatory and Credit Considerations

Canadian borrowers must be aware of the criminal rate of interest under section 347 of the Criminal Code, which was amended in 2025 to cap the maximum legal APR at 35%. Any lender charging an effective annual rate above this limit is operating illegally. This is particularly relevant for those seeking "private" mortgages or high-interest installment loans to cover down payments.

Provincial regulations also vary. In Ontario, high-cost credit rules are strictly enforced to prevent predatory lending, whereas Alberta's regulatory environment allows for different structures in private lending. Borrowers should verify the "Total Cost of Borrowing" disclosure provided by the lender, which must include all fees and interest, as mandated by the FCAC.

How to Apply

Applying for a fixed-rate mortgage requires a rigorous documentation process to satisfy the "stress test" (qualifying at the higher of the contract rate or the benchmark rate). Follow these steps to ensure a smooth application:

1. Gather Proof of Income: Provide T4s, recent pay stubs, and a Letter of Employment.
2. Document Assets: Provide statements for all savings, RRSPs, and the source of your down payment.
3. Credit Check: Ensure your Equifax/TransUnion reports are accurate; dispute any errors before applying.
4. Pre-Approval: Obtain a written pre-approval to lock in a rate for 90-120 days.
5. Final Underwriting: Submit the property appraisal and final legal documents for bank approval.

To maintain financial health, implement these four borrowing tactics: 1. Set up auto-pay: This prevents late fees and protects your credit score from "30-day late" markers. 2. Maintain a 6-month emergency fund: This ensures you can cover payments if employment is interrupted. 3. Use prepayment privileges: Applying extra payments to the principal reduces the total interest paid over 25 years. 4. Review rates annually: While you are locked in, knowing the current market helps you plan for the renewal date to avoid "sticker shock."

Verdict

Choose TD's Fixed Rate if: You have a strict budget, low risk tolerance, and plan to stay in your home for at least the full term of the mortgage. The stability outweighs the potential for lower variable rates.

Skip TD's Fixed Rate if: You anticipate rates will drop, you may sell the home soon, or you have the financial flexibility to handle fluctuating payments. In these cases, the IRD penalty risk is too high.

FAQ

Not financial advice. Rates and offers change. Read provider terms.