Historical 5-year fixed mortgage rates (Bank of Canada)

The 5-year fixed rate mortgage is extremely popular in Canada. We’ve got historical data direct from the Bank of Canada, going back as far as 1973. This data shows the average rate that the Bank of Canada found in the market for each week. This weekly 5 year fixed mortgage rate history is averaged, and is not weighted based on sales.

What exactly is a 5-year fixed mortgage?

The term ‘5-Year Fixed Mortgage Rate’ may sound like industry jargon to the uninitiated. But, in reality, it’s a simple concept that plays a significant role in the Canadian housing market.

A 5-year fixed mortgage rate is a type of home loan where the interest rate remains the same throughout the first five years, irrespective of fluctuations in the market rates. This type of mortgage rate provides homeowners with a sense of stability and predictability, which can be particularly useful when budgeting or planning for the future. The rate is ‘fixed’ for those five years, meaning it doesn’t change, and the homeowner knows exactly what they will be paying in mortgage interest during that period.

This doesn’t mean the mortgage is paid off in five years. Far from it. Most mortgages in Canada span 25 years or more. But the terms of the mortgage, specifically the interest rate, are renegotiated every five years. Hence the significance of the 5-year fixed rate—it’s the benchmark against which many Canadian homeowners measure their mortgages.

What is the history of the 5-year fixed mortgage in Canada?

The history of the 5-year fixed mortgage rate in Canada is a fascinating journey, beginning in the year 1973. This was a time when the global economy was undergoing significant changes, and Canada was not immune to these shifts.

In the early ’70s, the Canadian housing market was a far cry from what we see today. The concept of a 5-year fixed mortgage rate was still new, and homeowners were navigating this unfamiliar territory.

During this period, the mortgage rates were influenced by various factors such as inflation, government policies, and global economic conditions. It was a time of considerable economic volatility worldwide, with the 1973 oil crisis causing significant upheaval. These economic conditions often resulted in fluctuations in the mortgage rates, making it a somewhat unpredictable period for homeowners.

Over the course of the decade, however, the 5-year fixed mortgage rate began to see patterns and trends emerge. Despite the economic turbulence of the times, homeowners started to understand the rhythm of the market and the role that the 5-year fixed rate played within it.

The Impact of the 1980s

As we journey into the 1980s, the 5-year fixed mortgage rate in Canada took an intriguing turn. The decade was marked by a series of dramatic economic events that had a profound effect on mortgage rates.

The early ’80s saw a surge in interest rates around the world as governments grappled with high inflation. Canada was no exception. The Bank of Canada, under the leadership of Governor Gerald Bouey, adopted a tight monetary policy to rein in inflation, leading to a spike in mortgage rates.

A similar surge in rates happened in the USA, which impacted us across the border. You can learn about the history of American rates here.

At the peak of this trend, the 5-year fixed mortgage rate hit record highs, making homeownership a significant financial challenge for many Canadians. However, these high rates did not last forever. As the decade progressed, inflation was brought under control, and the mortgage rates started to stabilize, providing some much-needed relief to homeowners.

Despite these economic roller-coaster rides, the 1980s was a transformative decade for the Canadian housing market. It set the stage for the mortgage rate trends that would follow in subsequent years.

Navigating the 1990s and Early 2000s

Entering the 1990s, the Canadian economy was in recovery mode, and the 5-year fixed mortgage rate reflected this journey. This period was characterized by a gradual decline in the rates, making homeownership more affordable for Canadians.

The decline was largely due to the stabilization of the economy and the decreasing inflation rates. The Bank of Canada’s policies also played a significant role in ensuring the stability of mortgage rates during this period.

The turn of the millennium saw a continuation of these trends. The early 2000s were marked by relatively stable and low mortgage rates. The global economy was strong, and Canada benefited from this economic prosperity. The housing market flourished as homeownership became increasingly accessible.

However, this period of relative calm was not to last. The global economic landscape was about to change dramatically, which would have significant implications for the 5-year fixed mortgage rate.

The 2008 Financial Crisis and Its Aftermath

The financial crisis of 2008 was a seismic event that sent shockwaves through the global economy. The collapse of major financial institutions and the ensuing credit crunch had a profound effect on mortgage rates worldwide, including in Canada.

In response to the crisis, central banks around the world slashed interest rates in an attempt to stimulate the economy. The Bank of Canada followed suit, leading to a significant drop in the 5-year fixed mortgage rate.

The years following the crisis were marked by historically low mortgage rates. This was largely due to the sustained low-interest-rate environment as economies slowly recovered from the recession.

While the low rates made homeownership more affordable for some, they also led to concerns about rising household debt and the sustainability of the housing market. The recovery from the financial crisis was a delicate balancing act, and the 5-year fixed mortgage rate was at the heart of this journey.

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