Gap narrows between variable and fixed rate mortgages

By
Millicent Wong
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Following the Bank of Canada's recent rate cut, most banks have cut their variable interest rates by a quarter of a percentage point. This means that the leading variable rates are now only 86 basis points above the lowest fixed rates – compared to more than 150 basis points in March.

This, and the expectation of further rate cuts by the Bank of Canada, will encourage more borrowers to accept a variable rate. But before a significant number of borrowers jump on the variable rate, the spread will have to narrow even further. It will be many moons before we reach the 57 percent market share of variable rates in 2022.

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For those who can't stomach the interest rate risk, insured fixed rates for five-year terms are now just 4.44 percent. (Hopefully four-yearers will get lucky.) The uninsured option has finally broken the five percent mark and is now at 4.99 percent.

Editor's recommendations

  1. This week's rate cut will save Canadian borrowers with variable rate loans about $15 to $21 per month per $100,000 of credit.

    Why better days lie ahead for mortgage buyers

  2. Bookmark this page to find the lowest national mortgage rates in Canada.

    These are the lowest national mortgage rates in Canada

The best deal in the fixed rate space remains the three-year mortgage – especially if you can find one at 4.99 percent or less. Fixed three-year mortgages don't model as well as variable ones in interest rate simulations, but many people prefer their security until 2027.

Robert McLister is a mortgage strategist, rates analyst, and editor of MortgageLogic.news. You can follow him on X at @RobMcLister.

Want to know more about the mortgage market? Read Robert McLister's new weekly column in the Financial Post and find out the latest trends and details on financing opportunities you can't miss.

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Mortgage interest rates

The rates shown below are updated by the end of each day and are taken from the Canadian Mortgage Rate Survey by MortgageLogic.news. Postmedia and Imaginative. Online Inc., the parent company of MortgageLogic.news, receive compensation from certain mortgage providers when you click on their links in the charts.

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