5.2.7 Interest rates

The interest rate you negotiate may be fixed or variable. Each has its own advantages and disadvantages.

Fixed interest rate

With a fixed interest rate mortgage, you agree to a certain "fixed" rate of interest in the mortgage contract. This interest rate is set for the entire term, and the amount of your payments is also fixed.

Because the interest rate does not change, you know how much interest you will have to pay and how much of the original loan amount will be paid off during the term. A fixed term gives you security and a predictable budget.

Variable interest rate

With a variable interest rate mortgage, the interest rate can change during the term. It is adjusted to reflect market interest rates, which generally follow the Bank of Canada Bank Rate. The Bank Rate varied from 4.75 percent to 0.5 percent between 2005 and 2014.

Interest rates from 2005 to 2014

Interest rates from 2005 to 2014. Description below.
Source: Statistics Canada.

Text version: Interest rates from 2005 to 2014
Year and quarter Interest Rate
2005 January to March 2.75
2005 April to June 2.75
2005 July to September 2.83
2005 October to December 3.33
2006 January to March 3.83
2006 April to June 4.42
2006 July to September 4.5
2006 October to December 4.5
2007 January to March 4.5
2007 April to June 4.5
2007 July to September 4.75
2007 October to December 4.67
2008 January to March 4.08
2008 April to June 3.25
2008 July to September 3.25
2008 October to December 2.25
2009 January to March 1.08
2009 April to June 0.5
2009 July to September 0.5
2009 October to December 0.5
2010 January to March 0.5
2010 April to June 0.6
2010 July to September 1.08
2010 October to December 1.25
2011 January to March 1.25
2011 April to June 1.25
2011 July to September 1.25
2011 October to December 1.25
2012 January to March 1.25
2012 April to June 1.25
2012 July to September 1.25
2012 October to December 1.25
2013 January to March 1.25
2013 April to June 1.25
2013 July to September 1.25
2013 October to December 1.25
2014 January to March 1.25
2014 April to June 1.25
2014 July to September 1.25
2014 October to December 1.25

The interest rates on variable-rate mortgages are often lower than on fixed interest rate mortgages with the same term length, so variable interest rate mortgages may be attractive and save you interest in the long term. But it's very difficult to predict which will be the lower-cost option over the term of the mortgage.

With a variable-rate mortgage, the mortgage payments can be fixed or variable or a combination of both.

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