Get the best loan rates in Canada

A tool to compare mortgage rates

Shopping around for the best rate can save you thousands on your loan. To quickly compare rate types and terms, click the filters icon next to the down payment percentage in the Ratehub mortgage rate finder below. Enter your location, the price of the home you want to buy and your down payment amount. You can also adjust the mortgage term and type. Then simply tap “Ask” for more information.

Comparison shopping isn't just for things like TVs and cars. In fact, the most important purchase you may make in your life involves hunting for the best mortgage rate. Because when it comes to mortgages, even half of one percent can add up to big savings.

Comparing mortgage rates online is a good first step in finding a competitive rate. However, you'll also want to consider the many other factors that go into finding the best mortgage for your needs. For example, you may need the flexibility of an open-end mortgage (versus a closed-end mortgage that doesn't allow you to increase your mortgage payments). Or you may want a mortgage with a shorter term, such as three years instead of five.

Going over the scale and considering things like payment flexibility, amortization and the terms of your loan contract, and any potential fines and administrative costs associated with breaking the contract, will ensure that you have a complete understanding of all the costs of borrowing for your home.

How lenders determine their loan rates

There are two main types of mortgages in Canada: fixed rate loans and variable rate loans. Lenders use different criteria when determining the rate of variable and fixed mortgages.

Fixed mortgage rates

A fixed rate mortgage is one where the borrower's interest rate remains the same throughout the term of his loan. Lenders' default mortgage rates are closely related to the value of five-year government bonds. As bond yields rise, the value of the bonds falls and banks compensate for this loss by increasing their fixed-rate loan rates. (The new rates only apply to fixed-rate mortgage applicants and those renewing their existing contracts.) Conversely, when bond yields fall, bank loan rates tend to fall.

Variable mortgage rates

A variable rate mortgage has a variable rate (and therefore the amount of interest paid) based on changes in the bank's or the lender's principal amount. Lenders' prime rates are based on the Bank of Canada's overnight rate (also called the benchmark, target or policy interest rate). When the Bank of Canada raises its overnight rate (which it does when it tries to curb inflation), Canadian financial institutions usually raise their rates accordingly.

There are two types of variable rate mortgages in Canada. With a variable rate mortgage, the borrower's payment does not change with changes in the principal amount; instead, changes in the rate determine how much of your mortgage payment goes toward paying interest versus the principal on the loan.

There are also adjustable rate loans. With this, the borrower's mortgage payment changes as the borrower's principal amount increases or decreases.

What type of loan amount is best?

That depends on a few things. Since the rate on a variable rate loan can change over time, it offers less financial security than a fixed rate loan. That said, the history of mortgage rates in Canada suggests that owners of adjustable rate mortgages tend to pay less interest on their mortgage over time than those with fixed rate mortgages.

There are other factors, apart from the economic situation, that can affect the level of loan applicant is offered. To get the best loan rates in Canada, you usually have to have good credit. Those with low credit scores may not be able to qualify for a mortgage from one of the major banks. Their only option would be to use another lender, who will likely charge a higher rate. Similarly, mortgages without mortgage insurance often come with higher interest rates than those without, because uninsured loans carry more risk for the lender.

Video: How Canadian bank interest rates affect you

Should I use a mortgage broker or lender?

Many Canadian borrowers have traditionally gone directly to a mortgage lender, such as one of Canada's largest banks, to get a loan. There are some advantages to applying for a loan this way: You may have a strong relationship with a bank or mortgage provider, which can make the application process easier, and the institution may be able to offer you other financial products (such as a savings account or line of credit) in addition to the loan.

However, there are many reasons to consider working with a mortgage broker—a licensed professional who negotiates with multiple mortgage lenders to help you find the best loan rates.

Mortgage brokers act as intermediaries between lenders and borrowers, and their services are generally free to the borrower; real estate agents are compensated with a commission paid by the mortgage lender they choose to sign the deal with. You should still do everything you can to make sure the mortgage broker is licensed, working for you and giving you the mortgage you deserve.

In general, it is a good idea to compare loan rates from a range of mortgage providers and buyers. Some brokers only work with a small number of lenders—and some lenders choose not to work with mortgage lenders at all—which means you could be missing out on potential savings. Comparing offers from various sources is one of the best ways to get a competitive home loan rate.

How much payment should I have?

In Canada, when buying a home, whether it's a house, townhome or condo, the minimum amount required as a down payment depends on the purchase price of the property. Generally, you will fall under three conditions.

You can use our Mortgage down payment calculator to find out what your down payment should be.

Should you use an FHSA to buy a house?

Yes, if you qualify. A first home savings account (FHSA) is a registered account. It can be used as a savings account or an investment account, depending on which account you open and where. You must be 18 years of age or older, a Canadian resident and, of course, a first-time home buyer.

You can contribute up to $8,000 per year to your FHSA, up to a lifetime limit of $40,000. Is that enough for your house? It depends on your time frame and how long you can afford to let your money or investment grow. But for example, if you had saved $40,000 in your FHSA, you could buy a home worth $650,000. The average home price in Canada was $685,809 in February 2024, according to the Canadian Real Estate Association. That tells you that you will want your money to grow.

Fortunately, an FHSA works the same way as a registered retirement savings plan (RRSP) and a tax-free savings account (TFSA). Any money you contribute to an FHSA is tax-deductible, and you withdraw it tax-free, like a TFSA. Both are in case you use it to buy your first home.

Check out the best FHSA rates in Canada.

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