Nerdy Tip: After the Bank of Canada’s decision to lower the overnight rate on July 24, variable mortgage rates inched down by 0.25% and are now firmly below 6% at many lenders. Variable rates could fall further if the Bank decides to reduce its overnight rate again in September.
Disclaimer: The rates displayed do not include any taxes, fees, insurance, or other additional charges. These rates are estimates and are not guaranteed. The actual rate and loan terms you receive will depend on our partner’s assessment of your creditworthiness, loan amounts, and other relevant factors. Please note that any potential savings figures provided are estimates based on the information you and our advertising partners have provided. Terms and conditions apply.
Mortgage Brokerage licensed in ON #13072, AB, BC #X300983, MB, NL, NB #210042526, NS #2023-3000270, PE, QC #606914, SK #508695, YT
Five-year variable rates give borrowers the chance to pay lower rates in the future if interest rates fall, but if rates rise during the five-year mortgage term, their monthly payments could go up.
Canadian variable mortgage rate update: July 2024
After the Bank of Canada reduced its overnight rate by 25 basis points on July 24, variable mortgage rates quickly followed suit. Variable rates can now be found for less than 6% at many lenders. If the Bank makes another cut in September, variable rates will decrease again.
Variable rates are still closer to 6% than to 5%. It will take several more cuts to the overnight rate before variables become cheaper than fixed mortgage rates.
What is a 5-year variable mortgage rate?
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 the best variable mortgage rate?
Short answer: The “best” variable mortgage rate is the lowest rate you can qualify for on the specific loan product that best fits your finances. The best rate available to one person depends largely on their financial profile, which includes credit score, income and other debts. As a result, there’s no way to determine a “best” or “average” rate that applies to everyone.
Historical variable rate trends
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 preceding years. But today, those same 2019 rates look pretty sweet. It’s just a matter of perspective.
Mortgage payment calculator ↗
Estimate your monthly mortgage payments.
Mortgage affordability calculator ↗
Estimate how much house you can afford.
Mortgage closing costs calculator ↗
Create a home buying budget by estimating your closing costs.
Will variable mortgage rates come down in 2024?
Variable mortgage rates started decreasing in June 2024, after the Bank of Canada reduced its overnight rate for the first time in four years. Variable rates will decline with every Bank of Canada rate cut.
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, so never assume you know exactly where rates are heading.
Explore more of Canada’s best mortgage rates
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.
How to choose between fixed and variable rates
When you compare fixed- and variable-rate offers, don’t stop at comparing what payments would look like today. Work with your lender or use a mortgage calculator to see what the benefit of falling rates would look like — and what it would look like if rising rates were to make your monthly payment go up.
Who variable rates are best for
Choosing a variable-rate mortgage comes with a risk — that your payments will rise. Because variable rates tend to be lower than fixed rates, you’d benefit if rates stay the same or fall during your mortgage term. The more confident you are that this will happen, the more you may consider a variable rate. In addition, a person who chooses a variable rate should be in a financial position to pay a larger amount if rates end up rising. If your initial mortgage payment is already stretching your housing budget, a variable-rate mortgage may be too risky, even if you are confident that rates will fall.
Explore posted and discounted rates at Big Six banks
DIVE EVEN DEEPER
Fixed vs Variable Mortgage Rate: Which Is Better For You?
With a fixed-rate mortgage, your interest rate and payments won’t change during your mortgage term. But they might if you opt for a variable-rate mortgage.
Kurt Woock
Clay Jarvis
Find the Best Mortgage Rates in Canada
Compare customized mortgage rates from Canada’s best lenders and brokers for free. Find and easily apply for the lowest mortgage rate for your needs.
Preparing For Mortgage Renewal Shock
If your mortgage renews in the coming months, it’s going to sting. Prepare for renewal shock by shopping around and understanding your options.
Should You Switch to a Fixed Rate For the Rest of Your Mortgage Term?
Switching your mortgage from a variable to a fixed interest rate can help make your mortgage more affordable if rates are rising.