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Mortgage Rate Curve – Jan. 15, 2015

The chart below shows the average best rates for each mortgage term on


This graph provides a sense for how much of a rate premium you’ll pay for the security of a longer-term and/or fixed rate.

Key Takeaways:

  • The difference (spread) between 5-year fixed and variable rates remains narrow by historical standards at roughly 0.57 percentage points. The long-term average is about 1.25.
  • When the fixed-variable spread gets tight, it makes the 5-year fixed (Canada’s most popular term) more appealing — especially for risk-averse borrowers.
  • Well-qualified homeowners willing to ride out potential rate hikes will find the best upfront savings in a 5-year variable, which range from 2.05% to 2.15%+ (on depending on the features you need.
  • A few providers are advertising 1.98% effective rates on one-year fixed terms, but those specials require a line of credit, and hence legal fees to set up. They also include cash back as part of that 1.98% rate, in lieu of an actual rate discount (which can actually put you further ahead if you use the cash to make an immediate prepayment).
  • Those wanting to diversify rate risk should consider a hybrid — 50% fixed and 50% variable, for example. The best rates on hybrids (a.k.a., combination mortgages) are currently 2.53-2.65%. A hybrid lets you participate in rock-bottom rates while providing some protection against a spike in interest costs.



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