Why now is a good time for Canadians to lock in a mortgage

Many lenders are offering fixed mortgages at lower rates than variable mortgages (Getty)
Many lenders are offering fixed mortgages at lower rates than variable mortgages (Getty)

If you’re in the market for a mortgage, you might want to think about a 5-year fixed because rates have fallen to the lowest level since September 2017.

The drop has coincided with a fall in bond yields, which lets lenders offer lower rates while still turning a profit. There’s also a seasonal effect.

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“Lenders also typically offer their most competitive rates at this time of year in order to capitalize on the busy spring homebuying season, when Canadians are looking to secure a mortgage,” James Laird, Co-founder of Ratehub, told Yahoo Finance Canada.

The timing is spot on considering sales are surging in Toronto, Canada’s biggest housing market.

"The drop in the best 5-year fixed rate by 0.6% in four months highlights why consumers should continue to shop around to ensure that they are getting the best rate before locking in to a mortgage rate,” said Laird.

“With so many of the spring home purchases closing in June, the timing is excellent for consumers to take advantage of these new low rates.”

Before locking in, Laird says it’s important to look at the fine print for things like penalties to break a mortgage, HELOC options, and prepayment privileges.

If you’ve decided a 5-year fixed is the way to go, Laird says the best rates can be found at Equitable (Fixed: 2.89%, Variable: 2.90%), MCAP (Fixed: 3.09%, Variable: 3.10%), DUCA (Fixed: 2.89%, Variable: 2.95%) and Scotiabank (Fixed: 3.24%, Variable: 3.35%). It’s worth noting that fixed mortgages are cheaper than the variable option at all of them.

“Most Canadians are opting for the 5-year fixed rate right now since the rates are similar to variable rates being offered by lenders - less than 3% - and are at the lowest point they've been in 2 years,” he said.

“This is true for all Canadians whether they're renewing or getting a new mortgage.”

Unless the Bank of Canada cuts its benchmark interest rate, don’t expect variable mortgage rates to go down. On the other hand, Laird says fixed rates may have room to fall even further.

Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitte@jessysbains

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