Canadian fixed and variable mortgage rates
How much lower are our rates? See for yourself below.
Last updated: December 2, 2022
How much lower are our rates? See for yourself below.
Last updated: December 2, 2022
The pros of a fixed rate mortgage is the predictability. Your monthly mortgage payments will be consistent for the duration of your term regardless of which way rates move, offering stability when it comes to budgeting.
The cons of a fixed rate mortgage is uncertainty regarding penalty fees if you choose to break your mortgage before the end of the term. Fixed rates will calculate the penalty based on the greater of a 3 month interest penalty or an interest rate differential (IRD), which is just a fancy way of saying that you pay the lender for all the interest they’re missing out on for the rest of your term. This is most punitive in a falling rate environment, meaning rates are lower than when you first got your mortgage. If you have a variable rate mortgage or rates have gone up since you first got your fixed rate mortgage, it’s likely that you’d pay a 3-month interest penalty under either scenario.
The right option for you will be a mixture of personal preference and the current economic environment, since lender offers can change as often as each day and the value of each option can differ. When you open an account with Perch, our tools help break down the economic value of either option and you’ll also be able to consult your dedicated mortgage advisor to come up with a strategy that’s right for you.
It’s easy to confuse term with amortization. The mortgage term is the length of time your mortgage contract is in effect, and can range in duration from six months to 10 years. The most popular mortgage term in Canada is five years.
The amortization is the length of time it takes a borrower to repay their mortgage in full. The most common amortization period in Canada is 25 years. You can choose a shorter amortization period, which will reduce the amount of interest you pay on your loan since you’re choosing to pay the loan back faster. However, a shorter amortization also means an increase in your monthly payment amount and a lower mortgage amount that you can afford. While it seems counter intuitive, it may not always be advantageous to pay down your mortgage as quickly as possible.
If you are buying a property with a down payment of 20% or more of the purchase price, or if you have at least 20% equity in your property, you can choose a 30-year amortization period to reduce your monthly payment amount (and also pay more interest over a longer period as a result).
Basis points, also called bps (pronounced as “bips”) are a unit of measurement used to describe the interest rate changes in a mortgage. One basis point is the equivalent of 0.01%, or 0.0001. One hundred basis points equals 1%.
If you’re like most people, you’ve likely assumed that by paying a higher down payment on your home purchase, it would translate into a lower mortgage rate. Unfortunately (or fortunately, depending on how much money you were planning to put down), this isn’t always the case.
If your down payment is less than 20%, it is mandatory for you to get mortgage default insurance. Mortgage default insurance is often referred to as CMHC insurance. Since you paid for your own insurance premium with a down payment , the lender doesn’t need to buy it on your behalf.
If your down payment is 20% or more, you do not need to get mortgage default insurance or CMHC insurance. However, this means the lender then has to pay for your mortgage default insurance premium on their end and they charge for it through a higher rate to offset it. The higher your down payment, the lower the default insurance premium and typically by the time you have 35% down payment or more, your rate would be essentially the same as if you had less than 20% down.
The lender has minimal risk under either scenario (5% down or 20% down) because all of these loans have mortgage default insurance. The only difference is who pays for either pay or don’t pay for that premium, which is why rates fluctuate as a result.
The most popular mortgage term in Canada is five years. However, you can choose a mortgage term as short as six months or as long as 10 years.
For most people, getting a mortgage will mean borrowing a significant amount of money and paying it back over a long period of time. Over that period, otherwise known as the amortization, you’ll be paying a lot of interest on that loan. Even the difference of a small fraction of a percentage point, also referred to as a basis point, can have a big impact on the amount of money you’ll pay over the lifetime of your mortgage.
Some factors that will personally affect the mortgage rates you’ll be offered compared to someone else:
There are many other factors, which your mortgage advisor can go over in more detail with you.
Mortgage rates are updated daily, from Monday to Friday, not including holidays. While the rates are updated daily, that doesn’t necessarily mean the rates will change each day.
A change in the prime rate will only affect your mortgage if you have a variable rate, which is quoted to you as prime +/- a percentage. If the lender’s prime rate goes up or down, your mortgage rate and payment will follow. Your payment changes one full payment after the rate change.
For example, if prime rates increased on February 6th and your payments are on the 1st of every month, your mortgage payment wouldn’t increase until April 1st.
Shopping for a mortgage can be a frustrating and time-consuming process. Instead of calling around to multiple lenders or waiting for mortgage brokers to respond, you can quickly see your available mortgage offers in just a few clicks. These are real mortgage offers that would actually be available to you if you qualify, without having to submit a ton of information upfront.
Nothing is more frustrating than not being able to qualify for an advertised mortgage rate. Ads from banks can be misleading. We make it easy for you to instantly compare different mortgages between lenders, rates, different terms, and expected penalty fees. These are mortgages you could actually apply for when you sign up for a Perch account.
When you see a mortgage offer you like, we encourage you to sign up for a Perch account and follow the step-by-step instructions in our online platform to submit your mortgage application. Rates usually can be locked in up to 120 days in advance and your dedicated mortgage advisor will be available by phone or email, seven days a week, in case you need support or have questions about the mortgage application process.
Here are the steps to getting a mortgage in Canada:
When you sign up with Perch, you’ll be assigned a dedicated mortgage advisor to help you strategize how to pick the right mortgage and submit your mortgage application to the lender. We even have a network of realtors and lawyers you can leverage if you’re just getting started.
To make getting a mortgage online as quick and easy as possible, you should have the following documents available as a PDF and ready to upload into your Perch account.
Note: All documents should be current, valid and not expired. Where applicable, you must show the most recent version of the document, such as a bank account statement or paystub.
If you’re like most Canadians, you probably asked a close family member or a friend for guidance on where to get a mortgage. Many people get mortgages from their bank, not realizing a bank can only offer their mortgage products. They will not show you mortgage products from other lenders.
When you use a service like Perch, we’ll show you all available mortgage offers, including mortgages from banks, credit unions, and mortgage investment companies, all in one place. In all likelihood, your odds of saving money on your mortgage are much greater when you’re shopping from multiple lenders as opposed to going directly to a bank.
If you’re actively shopping for a property, you’ll want to consult with a mortgage advisor before putting in an offer. In hot markets like Toronto, Ontario or Vancouver, British Columbia or Calgary, Alberta, offers are due on evenings or weekends. These are times when your bank isn’t open, making it difficult to consult with their mortgage specialist and leaving you in the dark when you’re trying to make an offer.
These days, using a mortgage broker is becoming more popular in Canada. Unlike going directly through a bank, brokers can access mortgage offers from multiple lenders, making it easier to shop around.
Brokers are different from online rate marketplaces, which often accept money from lenders to rank their mortgage offers in a specific order. This means the promoted mortgage offer you see at the top of the page isn’t necessarily the one that’s most beneficial to you.
Brokers are only paid if you choose to get a mortgage through them, which means they’re highly motivated to ensure your mortgage application is completed correctly and submitted successfully.
We use data modeling to compare the expected fixed/variable rate against the current rate to determine where rates will move. Lenders typically lag macroeconomic events, so we can identify temporary pricing opportunities.