Canadian Mortgage Rates Show Stark Contrast Between Fixed and Variable

The current mortgage rates in Canada are showing a significant difference between fixed and variable rates. As of late Thursday, September 10, the lowest advertised high-ratio five-year fixed mortgage rate is 4.09%, while the lowest advertised variable rate is 3.30%. This means that borrowers choosing between these two options would pay an effective insurance premium of around C$211 a month on a C$500,000 mortgage amortized over 25 years.

For investors, this gap explains both the appeal of variable loans and the next risk building inside Canadian bank mortgage books. The Bank of Canada held its overnight target at 2.25% on September 2, but fixed mortgages are priced from term funding costs, with the five-year Government of Canada bond yield acting as the key reference.

The eight-basis-point move in this benchmark is small for a single borrower but meaningful for lenders competing on thin advertised spreads. As a result, today's cheapest fixed quotes have less room to fall and can be withdrawn before the central bank changes anything.