Five-Year Mortgages Are Now Under 20% of the Market: What to Weigh in a Shorter Term
National Bank’s chief economist says five-year terms are a record-low share of outstanding mortgages. Before the 28 October decision, here is how to think about term length.
The short version
- National Bank’s chief economist said five-year mortgages now make up less than 20% of outstanding mortgages, the lowest share he has seen in his career.
- A shorter term brings you back to the table sooner, which can help or hurt depending on what borrowing costs and your own finances do.
- Economists are split on the Bank of Canada’s 28 October decision, with some major banks now calling for an increase to 2.50%.
- Term length is a choice about flexibility and risk, not just the number on the offer.
The shift to shorter terms
The five-year term used to be the default. According to one of the country’s senior economists, it is now a minority choice.
Speaking at Mortgage Professionals Canada’s conference on 19 October, National Bank chief economist Stéfane Marion said five-year mortgages account for less than 20% of outstanding mortgages, “the lowest share he has seen in his career,” as Canadian Mortgage Trends reported. He tied the shift to Canadians’ sensitivity to higher borrowing costs, and noted that five-year fixed pricing has reached its highest level since 2024 as global bond yields rose and lenders’ spreads normalized.
That fits a pattern we have written about, in bond markets tightening conditions and in the arithmetic of the variable discount.
Why 28 October matters to the choice
The Bank of Canada announces its next decision on 28 October. According to a Bloomberg report carried by Canadian Mortgage Trends, BMO, RBC Dominion Securities and Desjardins changed their calls on 19 October and now expect an increase to 2.50%, Scotiabank firmed up its own call for a hike, and traders in overnight swaps put the odds of an increase at 87%. The same report says the consensus in a recent Bloomberg survey still pointed to a hold.
Marion argued the opposite should happen: he said the Bank should not hike next week, and that if it does, it should not be too aggressive. Smart people disagree, which is the point. Nobody knows, and this article does not predict what the Bank will do.
What a shorter term trades away
A one-, two- or three-year term is not good or bad. It is a different bet. Here is what changes.
- You renew sooner. That can be useful if you expect your situation to improve, or if you expect borrowing costs to ease. It also means you face the market again in a shorter window, possibly at a higher setting.
- You renew with a new qualification risk if you switch lenders. A straight renewal with your existing lender generally does not re-run the stress test, but a move to another lender is a new application. Our switching lenders at renewal piece explains that.
- Penalties may differ. Shorter fixed terms and variable mortgages are often cheaper to leave, but check your own contract. See why fixed penalties dwarf variable ones.
- More decisions, more paperwork. Each renewal is a chance to review, but also a task to handle on time.
If your term ends soon
Lenders typically send renewal offers well ahead of maturity, commonly around 120 days out. Our 120-day window explainer covers what you can and cannot do in that time. The earlier you start, the more options you keep.
On our Mortgage Renewal page we set out the decisions in order. In a market where economists disagree about direction, the useful exercise is to test your payment at a few outcomes, and the calculators let you do that in minutes.
A short checklist before you choose a term
- How long do I realistically expect to stay in this home or keep this mortgage?
- Could my budget absorb a noticeably higher payment at the next renewal?
- Do I need the ability to change structure mid-term? A readvanceable approach such as RateShield Advance is worth discussing in advance.
- What would breaking early cost under the contract I am offered?
Lender policies differ, and what is available depends on your file.
Nearly thirty years in Canadian financial services, based in Waterloo Region and working across Ontario. Most people are handed a product — you deserve a plan.
Quotations and figures are from the Canadian Mortgage Trends reports linked below, which carry Bloomberg and National Bank’s remarks, and from the Bank of Canada’s published schedule. Market-pricing figures are as reported at the time. Everything here is general information only, illustrative, and subject to full qualification, lender approval and final terms. Nothing here predicts what the Bank of Canada, any lender or any housing market will do.
Sources: Canadian Mortgage Trends — Home prices could stabilize in 2027 as mortgage rates near peak: National Bank · Canadian Mortgage Trends (Bloomberg) — Bank of Canada hike bets grow among economists, traders · Bank of Canada — Schedule of announcements