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Find the Best 1-Year Fixed

Mortgage Rates in Canada

Compare the latest 1-year fixed mortgage rates from major banks, credit unions and mortgage brokers.

Today's top rates in:

5-Year Variable
5.44%
5-Year Fixed
4.28%
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Compare 1-year fixed mortgage rates from lenders across Canada

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Today's top 1-year fixed mortgage ratesUpdated 14:26 ET on Feb 02, 2023

Rates are based on a home value of $500,000

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6.24%
Term
1 Yr Fixed
Loan to value
Up to 95%
Insurance
Insured
Rate held until
Jun 05
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6.49%
Term
1 Yr Fixed
Loan to value
Up to 95%
Insurance
Insured
Rate held until
May 06
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7.04%
Term
1 Yr Fixed
Loan to value
Up to 95%
Insurance
Insured
Rate held until
Jun 05

Rates are based on a home value of $500,000

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6.54%
Term
1 Yr Fixed
Loan to value
Up to 95%
Insurance
Insured
Rate held until
Jun 15
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6.04%
Term
1 Yr Fixed
Loan to value
Up to 95%
Insurance
Insured
Rate held until
Jun 05
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6.29%
Term
1 Yr Fixed
Loan to value
Up to 95%
Insurance
Insured
Rate held until
Jun 05

Rates are based on a home value of $500,000

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5.99%
Term
1 Yr Fixed
Loan to value
Up to 95%
Insurance
Insured
Rate held until
Jun 05
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Written by Joel Kranc

What is a 1-year fixed mortgage rate?

According to data from Mortgage Professionals Canada, only about 5-6% of Canadian mortgage shoppers choose a 12-month term.

That said, they may be the perfect choice for some mortgage shoppers.

In mid-2020, 1-year fixed rates attracted attention by becoming the first contract mortgage rates to fall below 1.40% in Canadian history. For that reason, they remain a solid alternative to a variable rate.

Below we explore what you need to know about the 1-year fixed mortgage term, including its benefits and drawbacks.

Why are 1-year fixed rates popular?

One-year fixed mortgages are the shortest fixed-rate mortgages a prospective homeowner can get. Current 1-year fixed mortgages are popular for many reasons: 

  • The rates are usually lower than other terms. 
  • They're a good option for homeowners who don't expect to have a mortgage beyond 12 months. 
  • It allows for refinancing flexibility without penalty. 
  • Allows homeowners to capitalize on a falling interest rate environment: they can easily refinance if variable rates drop further the following year.

For the risk-averse person, a 1-year fixed mortgage rate in Canada allows a borrower to avoid the risk of a rate increase during the mortgage term. But there are risks, of course. 

Suppose you have a $400,000 mortgage with a 25-year amortization schedule, and you take a 1-year fixed mortgage with an interest rate of 5.65%. A year passes, and now rates are 200 basis points higher. When your mortgage renews, your payments will increase by $472 or $118 per month per $100,000 borrowed. 

Most Canadians choose longer terms (the most popular term is five years) and put up with a slightly higher rate to avoid such problems at renewal. The amount of paperwork that accompanies new mortgage negotiations is also inconvenient for most.

What causes changes in 1-year fixed rates?

One-year fixed mortgage rates in Canada, like all interest rates, follow government bond yields, except in this case, they follow 1-year government bond yields. 

Bond yield is a way of measuring the annual return on a bond investment. A bond's yield is expressed as a percentage. At the time of issuing, each bond comes with a face value and a fixed amount of interest amount that it pays, known as its coupon rate. Then when bonds are bought and sold on the open market, they may sell for above or below the face value. 

Banks are quicker to raise their fixed mortgage rates and slower to lower them in relation to bond yield movements. They can’t be too reactive to changing market conditions if they're to remain solvent.

One-year Canadian bond yields vs. 1-year conventional mortgage rates


As inflation has steadily risen, so have interest rates. As a result, bond yields have been steadily climbing since late spring 2022.

Bond prices have an inverse relationship with mortgage interest rates. As bond prices increase, mortgage interest rates go down and vice versa. This is because mortgage lenders tie their interest rates closely to Treasury bond rates.

When bond interest rates are high, as they are becoming now, the bond is less valuable on the secondary market. This causes mortgage interest rates to rise. The value of each bond goes up when bond interest rates fall again. This causes mortgage lenders to lower their rates. However, we are still in a situation of rising interest rates and bond yields for the time being.

Date 1-year conventional mortgage rate 1 - 3 year Government of Canada marketable bonds (average yield)
2020-07-15 3.09 0.24
2021-01-13 2.79 0.16
2022-03-23 2.94 1.99
2022-03-30 2.99 2.21
2022-04-06 3.09 2.28
2022-04-27 3.29 2.47
2022-05-11 3.49 2.66
2022-05-25 3.79 2.48
2022-06-15 4.29 3.24
2022-06-22 4.69 3.22
2022-06-29 4.74 3.12
2022-07-27 5.19 3.09
2022-09-14 5.39 3.72
2022-09-21 5.69 3.73
2022-10-05 6.09 3.83

How do major banks price 1-year mortgages?

All fixed-rate mortgages are influenced by the bond market. Mortgage lenders invest in bonds and mortgages for profit. The profits are then recycled to purchase more bonds and issue more mortgages. Here's a list of the sources lenders rely on to finance mortgages:

  • Bank deposits
  • Mortgage-backed securities
  • Deposit notes
  • Canada mortgage bonds
  • Covered bonds
  • Five-year swaps
  • Investor purchases

To figure out the interest amount to charge on a fixed-rate mortgage, lenders look to the interest they're earning on bond investments. 

The government bond market in Canada broadly dictates fixed-rate mortgage rates. A five-year fixed rate, for instance, will track the five-year Government of Canada bond.

When bond yields rise, so do fixed-mortgage rates.

In the two years following the emergence of the COVID pandemic, Canada's economy expanded beyond economists' expectations. Consumer demand for goods (including houses) was overwhelming, causing inflation to rise. In 2022, the Bank of Canada began an aggressive rate increase strategy to help bring down demand and inflation.  

The Bank of Canada's decision to raise overnight rates led to a rapid surge in bond yields. As the bank drove up the cost of borrowing, the interest paid on bonds began going up, and mortgage rates quickly followed.

This was a stark reversal from late 2020 to early 2021, when bond yields and, conversely, mortgage rates bottomed. Mortgage lenders offered some of the lowest mortgage rates in history during this period.

History of 1-year fixed mortgage rates

Looking back at the performance of 1-year fixed rates in Canada, they have remained fairly stable over the past decade, with discounted rates most recently sliding to their lowest level on record.

Posted conventional 1-year fixed rates have steadily fallen ever since their peak of more than 20% reached in the early 1980s. Since the Financial Crisis of 2008-09, posted 1-year rates have remained roughly between 3.00% and 3.50%.

Historically, 1-year rates have tracked the performance of variable rates quite closely. More specifically, when deeply discounted, they have outperformed every other term besides a variable — over decades.

Pros and cons of 1-year fixed rate mortgages

Advantages of a 1-year fixed mortgage

Here's the upside to choosing a 1-year fixed mortgage: 

  • Lower rates compared to longer terms: Shorter terms often offer better pricing than longer terms. In the case of one-year rates, they can be a decent discount compared to two and three-year terms. They're also a great alternative to a floating rate when variable discounts are small by comparison, as was the case in the spring and summer of 2020. 
  • Less chance of paying prepayment penalties: For those unsure about their near-term life plans, locking into a longer fixed term can result in significant penalties should you break your mortgage early. With a one-year term, the odds of needing to break your mortgage before the end of the term are significantly reduced. 
  • Good for those who only need a short-term mortgage: A one-year term can be ideal if you only need a mortgage for roughly 12 months. Typical examples include property flips, credit rehabilitation and people with short remaining amortizations.
  • Those who expect rates to fall within 12 months: A 1-year fixed mortgage can be a great interim solution for borrowers who expect mortgage rates to fall in the next year. A one-year term allows them to shop the market in just 12 months. This is especially useful when variable-rate discounts are historically small.

Cons of a 1-year fixed mortgage: 

The following are some of the potential drawbacks of choosing a 1-year fixed mortgage: 

  • Little protection against rate hikes: If rates jump, you're not protected as you would be with a longer fixed term. 
  • Renewal hassle: Many people choose slightly higher rates for a longer term, such as the five-year mortgage, to avoid the perceived hassle of renewing their mortgage annually. A one-year term may be a good one-off option depending on your circumstances, but choosing one-year terms regularly can indeed become a headache at renewal time. 
  • Switching costs: If you opt for short terms such as the 1-year fixed— particularly for consecutive terms — you are more likely to face switching costs if you frequently change lenders.

One-year fixed rate predictions

If you want to try and guess the trend for 1-year fixed rates, you can watch Canada's 1-year Treasury bill yield.

Note that this doesn't yield a forecast for future rates, but over the long term, 1-year fixed rates track the 1-year Treasury bill yield fairly closely.

Inflation continues to be high, and the Bank of Canada has indicated more interest rate hikes may be ahead. With increased rates comes lower demand for bonds and treasuries, ultimately dropping the price of bonds and raising interest rates once again.

One-year fixed mortgage tips

One-year fixed rates have one of the shortest commitments of any mortgage term, which is why they often have the lowest rates on the market, even lower than floating rates at times.

Studies show that 1-year terms perform similarly to variable-rate mortgages regarding total interest cost.

Here are some 1-year fixed-term tips and how to make the most of this short-term mortgage product:

  • Keep in mind that lenders offer their best rates to new buyers but are notorious for quoting poor rates for existing clients at renewal time. This is especially true for 1-year fixed rates. That means there's a higher possibility you might have to switch lenders at renewal if you want the lowest possible pricing.
  • To qualify for a one-year term, you generally need to prove you can afford a payment based on a higher stress test rate – which is the greater of:
  • The posted 5-year fixed rate (a.k.a. the minimum qualifying rate) set by the Bank of Canada, or
  • The contract rate plus two percentage points.
  • There may be exceptions to this if you use a credit union.
  • Remember that you can start shopping for your renewal rate as soon as eight months into your one-year term since many lenders offer 90 to 120-day rate holds.
  • One-year fixed mortgages typically entail additional closing costs since many lenders do not pay legal and appraisal fees when you switch to a one-year mortgage. They generally do, however, for terms of three years or more.
  • Some 1-year terms come with the flexibility to convert into a longer term at any time. This is handy should interest rates rise over the course of your term. But remember, you likely won't get the best rate when you lock in because the lender knows you're a captive audience.
  • Because the Bank of Canada has indicated potentially more rate hikes, a 1-year fixed mortgage rate may result in higher costs as you look for new rates after the 12 months.

Frequently asked questions about 1-year fixed rate mortgages

We've got answers to some of the most common questions about short-term mortgages.

How can I find the best 1-year fixed mortgage rate in Canada?

Finding the best current 1-year fixed mortgage rate in Canada starts with comparison shopping. RATESDOTCA is the one-stop shop that allows you to compare the best rates in the easiest way possible. Major banks and mortgage brokers are at your fingertips and ready to help.

What happens at the end of a 1-year fixed mortgage?

Much like any other mortgage term, you will need to renegotiate or find new financing terms for a new mortgage. You may choose another 1-year fixed mortgage rate, should that satisfy your short-term lending needs. Or, if you're ready to commit, you may choose a longer-term mortgage rate. It all depends on your needs and the cost of borrowing at the end of your 1-year term.

Can you refinance a 1-year fixed mortgage?

mortgage refinance can be done anytime, not just at the end of your term. You can take out money for things such as debt consolidation. However, you will be penalized for refinancing before your term ends. Keep in mind that over the short term, interest rates can fluctuate, especially in today's market climate.

What is a mortgage rate lock?

A mortgage rate lock allows you to reserve an interest rate for a set period while renewing, refinancing or applying for a mortgage. Mortgage rate locks allow prospective homeowners to get the best mortgage rate available if interest rates increase.

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