Mortgage term
Fixed rate
Definition
A fixed-rate mortgage keeps your interest rate and payment constant for the entire term. The 5-year fixed is Canada's most popular product. Fixed rates are set from Government of Canada bond yields plus a lender spread.
Fixed rates give payment certainty — critical for household budgeting. The trade-off is that if the Bank of Canada cuts rates during your term, you don't benefit until renewal.
Breaking a fixed-rate mortgage mid-term triggers an IRD penalty, which can be very large when current market rates are much lower than your contract rate. For most homeowners at renewal, comparing fixed offers across multiple lenders is where the largest savings are found.