Compare 1-Year Fixed Mortgage Rates
Mortgage rates are ever-evolving and for many homeowners, choosing the type of mortgage that suits their financial situation best is all but impossible. In these instances, it can be best to select a 1-year fixed mortgage rate, which allows the homeowner to take time to watch the market and take more time to determine their best course of action.
In most cases, 1-year fixed mortgage rates are normally lower than 5-year fixed rates but it's important to keep in mind that the risk of signing on for a shorter term is considerably higher as it's impossible to determine what interest rates might look like a year from signing a mortgage.
Mortgage Stats in Canada
- As of 2023, 75% of Canadian mortgages are fixed-rate
- Most Canadians hold mortgages with amortization periods over 25 years
- As of Nov 2022, 0.15% of mortgages in Canada were in arrears
- 66.5% of Canadians own their own homes in 2021
- The prime rate in Canada as of Feb 2023 is 6.70%%
Bank of Canada
What Drives Changes in 1-Year Fixed Mortgage Rates?
In Canada, lenders secure fixed mortgages with Government of Canada bonds and as such, the yields from these bonds are the biggest factor in determining fixed mortgage rates. Bond yields are primarily affected by economic growth and inflation across the country.
Pros Of a 1-Year Fixed Mortgage
- 1-year fixed mortgages are more flexible
- At the end of the term, homeowners can change providers without penalty if they're unhappy
- Rates may decrease after one year and mortgage payments may lessen
Downsides of a 1-Year Fixed Mortgage
- Interest rates may increase after one year
- Interest rates may be higher than variable mortgage rates
How Much Can You Save Comparing 1-Year Fixed Rates
1-year fixed mortgage rates vary by several points depending on the lender and that's why it's so important to take time to compare rates and shop around. Working with a mortgage broker is often the best way to do this, as brokers have access to a variety of rates from different lenders across the country. By finding a lender with a lower rate, you may be able to save thousands of dollars on the purchase of your home.
1-Year Fixed Mortgage Rages vs. Longer-Term Mortgage Rates
A 1-year fixed mortgage is a great way to test the waters if you're not sure what type of mortgage you want to go for. This is especially true for new homeowners who aren't sure how the market works or how interest rates change over time. It gives you the opportunity to sit back and analyze the market while determining if a variable rate mortgage is the right choice for your budget. Once your 1-year is up, you can choose to renew for another year or change your mortgage type to something that's better for your household.
The Difference Between Fixed and Variable Rate Mortgages
The biggest difference between a fixed-rate mortgage and a variable-rate mortgage is the monthly payment you'll make on your mortgage. While a fixed-rate mortgage means that your interest and monthly or bi-weekly mortgage payments stay the same for the duration of your mortgage term, variable-rate mortgages change over time. Payments may change every few months to reflect current Bank of Canada interest rates. With a variable rate mortgage, interest rates are lower than fixed mortgage rates; however, in the event that rates increase drastically due to changes in the economy, homeowners may find themselves eventually paying more than they would have if they'd locked in their rate on a fixed term.
What is a Rate Hold?
Rate holds can be applied to variable or adjustable-rate mortgages for a short period of time. Using rate holds, homeowners can lock-in their mortgage rate temporarily to avoid an increase in their mortgage payments. Typically, rate holds can be applied for a period of 30 to 60 days; however, some lenders may allow rate holds of up to 120 days.
Why Compare 1-Year Fixed Mortgage Rates with My Rate Compass?
My Rate Compass is an impartial, unbiased hub of information with current, up-to-date mortgage rates from brokers and major banks across Canada. To find reliable information about mortgages, including accurate posted rates, use My Rate Compass to research your options before selecting a mortgage lender.