Fixed-Rate Mortgage
A mortgage where the interest rate is locked for the full term, keeping your monthly payment constant regardless of Bank of Canada decisions.
A fixed-rate mortgage locks your interest rate for the term you choose — typically 1 to 10 years in Canada, with 5 years being the historical default. Your payment stays identical for the full term, protecting you from rising rates but also preventing you from benefiting if rates fall. Fixed rates are priced off Government of Canada bond yields plus a lender spread of roughly 140–180 basis points. Because you're locked in, breaking a fixed-rate mortgage early triggers an Interest Rate Differential (IRD) penalty, which at the Big 5 banks is calculated against posted rates and can reach $15,000–$30,000 on a mid-size mortgage. At renewal, OSFI's November 2024 straight-switch rule allows you to move your uninsured fixed-rate mortgage to a new lender without re-qualifying at the stress test, as long as the amount, amortization, and payment schedule stay the same.
Related Terms
A mortgage where the interest rate is tied to Prime Rate and moves with every Bank of Canada Policy Rate decision.
The larger of two penalty calculations applied when breaking a fixed-rate mortgage early at the Big 5 banks — often the difference between your posted rate and the lender's current posted rate.
The interest rate on 5-year Canadian government bonds — the benchmark that drives 5-year fixed mortgage pricing.
The artificially high rate lenders publicly advertise — rarely paid by actual borrowers, but used for IRD penalty calculations at Big 5 banks.