Less than 10% of new borrowers are choosing the traditional five-year fixed-rate mortgage right now, opting instead for shorter fixed terms or variable rates. A shorter term lets you reprice sooner, which helps if rates fall and hurts if they rise. It also means you’ll negotiate your renewal roughly twice as often, so your maturity strategy matters more than ever.
Compare your renewal options: see what lenders across Canada would offer you before you sign your current lender’s renewal letter.
Fewer Than 1 in 10 New Borrowers Chose a 5-Year Fixed This Summer
The traditional five-year lock is losing its crown as the default choice in Canadian real estate, and the decline has been building for years. According to economists at National Bank of Canada, the share of new mortgages with fixed terms of five years or more fell below 20% in 2022. Shorter fixed terms took over in 2023 and 2024, and variable rates have been regaining ground since 2025.
This summer, that decline hit a new low.
What the National Bank data shows
In July 2026, only 8.8% of new mortgages carried a fixed term of five years or more. This represents the lowest share since National Bank began tracking the metric in 2013.
The other 91.2% of borrowers chose either a fixed term shorter than five years or a variable rate. By choosing a tighter horizon, these homeowners are trading long-term certainty for flexibility.
Why borrowers are going shorter
Price is a big part of it. Shorter fixed terms have often been priced at or below the five-year rate, and variable rates have become relatively cheaper while the Bank of Canada has held its policy rate at 2.25%. Five-year fixed rates follow bond yields instead, and the Bank of Canada noted in September that long-term yields have moved up. As those yields have climbed this fall, some variable offers have come in more than a full percentage point below comparable fixed rates, according to brokers quoted by Canadian Mortgage Trends.
Many borrowers also don’t want to commit to today’s fixed rates for five years. A three-year term gives you budget certainty for 36 months and a chance to reprice sooner. That cuts both ways: the Bank of Canada also said in September that upside risks to inflation have increased. If rates rise, a shorter term means you feel it sooner. For a closer look at the trade-offs themselves, see our comparison of 5-year fixed and shorter-term mortgages and our guide to choosing fixed or variable.
The Catch: Shorter Terms Mean Twice as Many Renewals
A shorter term keeps your options open, but it dramatically increases your administrative workload. Over a standard 25-year amortization period, a borrower on a five-year cycle negotiates just four renewals.
If you stick to three-year terms, you face roughly eight renewals before paying off the home. Each maturity date represents an opportunity to save money—or a severe risk of overpaying if you are unprepared.
Renewal is where Canadians overpay
Many borrowers don’t shop at all. Research from the Financial Consumer Agency of Canada (FCAC) found that 20% of mortgage holders did not compare lenders for their current mortgage.
FCAC also found that 37% chose their lender primarily because they already bank there, and 13% did not know that negotiating their rate or terms was an option. If you don’t compare, you have no way of knowing whether your renewal offer is competitive. (Here’s why shopping around at renewal matters.)
What signing the first offer can cost
Complacency can carry a steep price tag at maturity. Suppose you accept a renewal offer that sits 0.40% above the best rate available to you (say, 4.69% instead of 4.29%) on a $500,000 balance with a 25-year amortization.
Over a three-year term, that gap costs roughly $111 more per month and about $5,800 in extra interest by your next renewal. This is an illustration, not an average: the gap between offers varies, which is exactly why it pays to compare.
Renewing in the next few months? See how your renewal offer compares with what other lenders would offer you.
Switching Lenders at Renewal Is Easier Than You Think
Many borrowers stay with an uncompetitive lender because they assume switching involves a mountain of paperwork or a hefty breakage penalty. At maturity, this is simply not true.
When your mortgage reaches the end of its term, your contract is essentially a free agent. You can move your remaining balance to a new institution without paying any early payout penalties. Our guide to switching lenders at renewal walks through the process step by step.
Do you have to requalify to switch?
A November 2024 rule change by the Office of the Superintendent of Financial Institutions (OSFI) removed a major hurdle for homeowners. If you have an uninsured mortgage and want to do a straight switch at renewal between federally regulated lenders (meaning you do not add new funds or extend the amortization), you no longer have to pass the mortgage stress test again.
Insured borrowers got the same flexibility under the federal Canadian Mortgage Charter. The new lender will still review your application under its own underwriting rules, and if a provincially regulated lender such as a credit union is involved, confirm which rules apply. Skipping the stress test means you are not trapped at your current bank, giving you real leverage to find a better deal in the open market.
What switching actually costs
Moving your mortgage to a new lender generally does not drain your bank account. Many lenders want your business enough to absorb most of the setup costs.
New lenders often cover the appraisal and the legal costs to register the new mortgage, and some will reimburse the discharge fee your current lender charges. Always ask the prospective lender or your mortgage professional to confirm exactly which costs are covered. See what to consider before switching your mortgage for the full list of potential costs.
A Renewal Playbook for Short-Term Borrowers
To succeed with a short-term strategy, you need a proactive system. You cannot afford to be passive when your mortgage comes up for renegotiation every three years.
Treat your current lender’s renewal letter as an opening bid, not a final verdict. Applying a little friction to the process can yield thousands of dollars in savings over your next term, and it helps to know the most common mistakes people make when changing lenders at renewal.
When to start shopping
You should begin exploring your options roughly 120 days before your mortgage maturity date. Many lenders will hold a rate for roughly 90 to 120 days, so starting early gives you time to compare offers and lock one in.
Locking in a rate early protects your budget if lending costs rise. If rates drop before your renewal date, many lenders will let you take the lower rate, so ask how your rate hold works. Our guide to renewal rate holds and early renewal covers the details.
Re-choosing your term at each renewal
Just because you chose a three-year term last time does not mean you must do it again. Your strategy should evolve based on the current economic environment and your personal life plans.
If you plan to sell the property soon, an open mortgage or a one-year term might make sense to avoid restrictive penalties. Evaluate your risk tolerance and housing goals every single time you sign a new contract.
Checking the fine print on your renewal offer
The lowest interest rate does not automatically make for the best mortgage. You must look past the headline number to understand how the contract operates in the real world.
Review the prepayment privileges to see how much extra principal you can pay down each year without triggering a fee, and understand how prepayment penalties work if you might break the term. Check the amortization too: a lower payment can simply mean your payoff timeline was quietly extended. Additionally, verify whether the lender registers a standard or collateral charge, as this dictates how easily you can switch lenders at your next maturity date.
When the 5-Year Fixed Still Makes Sense
The sudden unpopularity of the five-year fixed-rate mortgage does not render it obsolete. For specific types of homeowners, locking in long-term remains the most logical financial decision.
Shorter terms require active management and an appetite for market risk. If that sounds exhausting, the traditional route still provides structural value.
Who should still lock in for five years
A five-year fixed term is highly effective for borrowers operating on a tight monthly budget. If an unexpected rate jump at a three-year renewal would threaten your ability to keep the house, securing five years of payment predictability provides necessary financial armor.
This path also suits the hands-off homeowner. If you know you will not shop the market or negotiate at maturity, limiting your exposure to just four renewals over 25 years acts as a built-in defense against overpaying. Our 5-year fixed vs. shorter terms comparison goes deeper on who each option suits.
What the Shift Means When Rates Move
National Bank describes the trend as faster “repricing.” When most new borrowers are on variable rates or short fixed terms, changes in interest rates reach household budgets within months instead of years. That works in both directions: a rate cut brings relief sooner, and a rate increase arrives sooner too.
It also means renewals will bunch up. Many borrowers who chose short terms in 2025 and 2026 will be back at the negotiating table within the next few years, on top of the pandemic-era mortgages already renewing. The Bank of Canada ’s next rate decision is on October 28. Bond markets have recently been pricing in rate increases over the next year, though economists are divided on whether they’ll happen, according to Canadian Mortgage Trends. Whatever the Bank decides, short-term and variable borrowers will feel it before anyone locked in for five years.
The Bottom Line
Choosing a shorter term was step one. The savings happen at renewal. If you’re on a short term, the most valuable habit you can build is comparing the market every time your mortgage comes due.
Compare your renewal options with Homewise, or check today’s rates first.
FAQs
Why are most Canadian borrowers avoiding the 5-year fixed mortgage right now?
Many borrowers are choosing shorter fixed terms or variable rates because those options have often been priced lower, and because a shorter term lets them reprice sooner instead of committing to today’s fixed rates for five years. The trade-off is that rate increases reach them sooner too.
What’s the main downside of choosing a shorter mortgage term?
Shorter terms mean you’ll face renewals more often, which can be an administrative burden and a risk if you don’t actively shop around. Failing to compare offers at renewal means you can’t tell whether you’re overpaying on interest.
Is it difficult to switch lenders when my mortgage renews?
No, switching lenders at renewal is generally straightforward. Uninsured borrowers moving between federally regulated lenders can skip the stress test on a straight switch, and insured borrowers can too. New lenders often cover costs like the appraisal and legal fees to earn your business.
When should I start preparing for my mortgage renewal?
It’s wise to start exploring your options about 120 days before your mortgage maturity date. Many lenders hold rates for roughly 90 to 120 days, so starting early gives you time to compare offers and lock in a rate.
Who might still benefit from choosing a 5-year fixed-rate mortgage?
A 5-year fixed term is often a good choice for those with a tight budget who need payment predictability, or for homeowners who prefer a hands-off approach and want to limit how often they negotiate their mortgage.
