The Best 5-Year Variable Mortgage Rates in Canada

Nerdy Insight: Variable mortgage rates will likely continue to hover around 6% until the Bank of Canada reduces its overnight rate. That may not happen until June.

Rates updated: January 10, 2024

MCAN	Strong mortgage features. Very good monthly pre-payment. Skip payment not available. Very good annual pre-payment.	6.00%		5 yrs. Term	Explore Now
MCAN	Strong mortgage features. Very good monthly pre-payment. Skip payment not available. Very good annual pre-payment.	6.20%		5 yrs. Term	Explore Now
Equitable Bank	Strong mortgage features. Very good monthly pre-payment. Skip payment not available. Very good annual pre-payment.	6.30%		5 yrs. Term	Explore Now
Radius Financial	Strong mortgage features. Very good monthly pre-payment. Skip payment not available. Very good annual pre-payment.	6.20%		5 yrs. Term	Explore Now
First National	Strong mortgage features. Very good monthly pre-payment. Skip a payment. Very good annual pre-payment.	6.30%		5 yrs. Term	Explore Now
Home Trust	Strong mortgage features. Very good monthly pre-payment. Skip a payment. Very good annual pre-payment.	6.30%		5 yrs. Term	Explore Now

Canadian variable mortgage rate update: March 2024

Despite a lower-than-expected inflation reading in January, the Bank of Canada held its overnight rate at 5% on March 6, 2024. Barring sudden spikes in inflation, the Bank’s next move is expected to be a rate cut, though nobody knows when that move will take place.

Currently variable rates remain above 6%. If you believe that variable mortgage rates have peaked and think choosing a variable-rate mortgage will save you money in the long run, keep in mind that variable rates won’t decrease until the Bank of Canada reduces its overnight rate. That might not be until June.

5-year variable mortgage rate: What it is and how it works

If your mortgage rate is variable, the interest rate you may rise or fall over the course of your loan term. Compare this to a fixed-rate mortgage, which remains the same throughout the loan, regardless of whether the lender updates the rates it offers new borrowers.

The factors that lead lenders to change their rates usually involve the larger economic context. For example, if the Bank of Canada raises its overnight rate, you can expect your lender to follow suit. If the BoC lowers its rate, your variable rate will likely fall.

This uncertainty creates a risk for borrowers, which is why you’ll typically find variable mortgage rates to be lower than fixed rates. That difference, of course, isn’t guaranteed to last. During times of high inflation, variable rates can surge past fixed rates. A BoC study showed that median payments for borrowers who opened a variable-rate mortgage in February 2022 had risen 70% by November 2023.

What’s a good variable mortgage rate?

Short answer: A “good” variable mortgage rate is the lowest rate you can qualify for on the specific loan product that best fits your finances. 

While it’s tempting to compare today’s rates to rates of the past, it’s a fruitless exercise. Just look at the following Statistics Canada data from the past 10 years, which tracks the average variable mortgage rate on insured mortgages in August of each year:

The variable mortgage rates available in August 2019 probably seemed really high compared to rates available in the years immediately before. But today, those same 2019 rates look pretty sweet. It’s just a matter of perspective. 

Predicting variable mortgage rates

Keep an eye on Canada’s inflation rate if you’re trying to anticipate where variable mortgage rates are headed.

If inflation is going up, the Bank of Canada is more likely to raise its overnight rate. When that happens, variable mortgage rates also increase. If inflation is falling, the Bank may lower this rate, which means lower variable rates.

Even professional forecasts are frequently wrong, however, so never assume you know exactly where rates are heading.

Will variable mortgage rates come down in 2024?

All signs point to variable rates finally starting to decline in 2024. It’s less certain when rate decreases may start and how far they may ultimately fall. Though, if a reliable downward trend in inflation occurs and the Bank is confident that reducing the overnight rate won’t lead to inflation rising again, you might see variable rates come down as early as June.

Pros and cons of variable mortgage rates

Pros:

• Lower rates. This isn’t guaranteed, but variable rates have historically been lower than fixed mortgage rates.
• Lower prepayment penalties. Variable-rate mortgages generally charge lower penalties than fixed-rate mortgages if you prepay too much of your mortgage or break your mortgage contract in some other way. 
• Switchability. If you’re afraid rising rates will lead to you being unable to make your payments, you may be able to switch to a fixed rate of interest for the remainder of your mortgage term.

Cons:

• Unpredictability. If variable mortgage rates rise, your mortgage payment could become unaffordable.
• Smaller prepayment penalties still sting. If you break a variable-rate mortgage because of financial difficulties, the penalty could equal three months’ interest.
• No portability. Your lender may bar you from porting a variable-rate mortgage unless you convert it to a fixed-rate mortgage. If you switch, you may not be able to afford your lender’s current mortgage rates.

Explore each Big Six bank’s posted and discounted rates: