Five-year fixed mortgages vie for crown as interest rates fall

By
Millicent Wong
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A whole range of fixed-rate mortgages have become cheaper this week, including the uninsured four-year fixed-rate mortgage and the insured one-, three- and four-year fixed-rate mortgages. And it looks like the preferred term for 2024 – the three-year fixed-rate mortgage – is slowly losing its crown.

“I think we're seeing a bigger shift to five-year terms now that rates are coming down,” said Justin Herlick, CEO and co-founder of Pine Mortgage. “As soon as there's a 'three' in front of it, a lot of people will go back to five-year terms,” ​​he predicts. That's the term most Canadians have preferred in the past.

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For people with commitment issues who need default insurance, Marathon Mortgage now offers a six-month fixed rate of 4.19 percent that you can convert to a variable rate. The main benefit, however, is not the interest savings, but rather the flexibility it provides borrowers to get approved. The 4.19 percent contract rate goes hand in hand with just about the lowest “stress test” mortgage rate in Canada, 6.19 percent. That means borrowers with slightly lower incomes can get a mortgage of the same amount.

Note: True North Mortgage offers a 3.49 percent version of this six-month product, but the renewal rate “may be subject to a premium,” the company says. Both offers come with a one percent fee if you don't renew after six months.

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Looking ahead to next week: Wednesday is set to be a momentous day in mortgage land. Markets are bracing for the Bank of Canada's third rate cut in just over three months. Forward rate data from CanDeal DNA puts that prospect at a near 100% probability. So, to all you variable rate borrowers out there, celebrate this long weekend with some savings.

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

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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