A fixed mortgage rate means that your interest rate is set at the beginning of your term and will not change throughout the duration of your mortgage term. This mortgage type offers a predictable and steady payment structure as your interest rate will always remain the same.
A variable mortgage rate means that your interest rate may fluctuate intermittently because it is based on the market (prime) rate. It can offer significant savings at the beginning of your mortgage term. A variable rate mortgage provides you with flexibility to take maximum advantage when interest rates fall. However, should interest rates rise, a greater portion of your repayment amount will go towards the interest payment versus the principal of the overall mortgage.
2.96% 3 Year
2.99% 5 Year
Canadian interest rates
Below is a chart showing the Bank of Canada’s Benchmark Rate (Yellow), the 5-year Conventional Mortgage Rate (Orange), and the Prime Rate (Blue).
The benchmark rate or commonly referred to as the qualifying rate is the rate banks will use to calculate your hypothetical mortgage payment for debt ratio analysis. This rate is used to determine the amount at which you are approved for. It is important to note this is not the rate reflected on your contract but rather used to qualify the mortgage amount. The 5-year conventional rate or posted rate is the average rate banks will use for a 5 year fixed term before applying any discounts. Prime is used to determine a variable rate and is then represented as ex. P-0.90 or Prime-0.90. It is important to note that prime can only change at prescheduled dates set out by the Bank of Canada, in eight announcements per year, however, the benchmark rate and conventional rate can change at anytime.