Find the Best 2-year fixed Mortgage Rates in Canada

Compare the most current 2-year fixed rates from major banks, credit unions and mortgage brokers.

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5-Year Fixed
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What is a 2-year fixed mortgage rate?

A 2-year fixed mortgage rate is a mortgage where the interest rate, and your monthly repayments, stay the same for two years. In return for paying a slightly higher interest rate than on variable rate mortgages you get the peace of mind of a locked-in rate.

Current 2-year fixed mortgages are popular for many reasons, which include:

  • The rate is lower than other terms
  • They don’t expect to have a mortgage beyond a 24-month period
  • It allows for re-finance flexibility without penalty
  • If they think variable rates will improve over the next year

For the risk averse person, a 2-year fixed mortgage rate in Canada allows a borrower to avoid risk of a rate increase during the term of the mortgage. However, 2-year fixed mortgage rates offer little rate protection in rising-rate environments compared to longer terms. 

  • More frequent renewals: While not as bad as a 1-year term, two years can still fly by quickly. That means you’ll need to spend additional time renewing (about 3-6 hours if you need to change lenders for a better deal). It can also mean added switching costs if your existing lender is not competitive.
  • More expensive than variables: That’s true most of the time. And it’s particularly true when the Bank of Canada is cutting rates. The one exception is when financial crises shrink variable-rate discounts. In that particular case, short-term fixed rates can be temporarily lower than variables.

2-year fixed rate predictions

If you want to try and guess the trend for 2-year fixed rates, you can do so by watching Canada’s 2-year Treasury bill yield.

Note that this doesn’t yield a forecast for future rates, but over the long term, 2-year fixed rates do track the 2-year Treasury bill yield fairly closely.

Inflation continues to be high, and the Bank of Canada has indicated there may be more interest rate hikes ahead. With increased rates comes higher less demand for bonds/treasuries, ultimately dropping the price of bonds and raising interest rates, once again. There will be one more interest rate announcement in 2022 by the Bank of Canada on December 7.

History of 2-year fixed mortgage rates

Discounted 2-year fixed rates are currently at their lowest level in more than a decade.

They began the decade at around 2.75% and gradually trended downwards to just above 2.00% by 2016-17.

But in just the last three years, 2-year fixed rates reached highs of more than 3.00%. Compare that to nationally available discounted 2-year fixed rates of just 1.59% (for default-insured mortgages) and 1.84% (for uninsured mortgages), as of fall 2020.

2-Year fixed mortgage tips

For those choosing a 2-year fixed rate, here are a few tips to get the most out of this relatively unpopular short-term product:

  • Keep in mind that you can lock in your renewal rate in just 20 to 21 months, given that most lenders offer 90- to 120-day rate holds. Starting the renewal process early always affords you more options compared to leaving it to the last minute.
  • The majority of lenders don’t pay legal and appraisal costs if you’re switching into a 2-year mortgage. That’s typically a benefit offered on terms of three years or more. However, some lenders do, including most of the top banks. You’ll need to contact the lender directly to confirm what costs they cover.
  • To qualify for a 2-year fixed mortgage, you generally need to prove you can afford a payment based on the “stress test” rate – which is the greater of:
    • the Bank of Canada’s posted 5-year fixed rate
      • This is also referred to as the “benchmark rate” and “minimum qualifying rate” OR the contract rate plus two percentage points.
  • You may be able to get around having to qualify under the stress test if you’re applying through certain credit unions.
  • If you’re planning two take advantage of lower 2-year fixed interest rates before converting into a longer term at a later date, beware that many lenders offer inferior rates to those converting to longer fixed terms. Unlike a new mortgage shopper who has numerous options at their disposal, lenders know you’re a captive client in this situation and that your options are limited. Hence, you should be prepared to switch lenders when you go to lock in long-term.
  • Remember that just 1 in 14 Canadian borrowers opt for a 2-year fixed, on average. There’s often a good reason why the masses avoid particular mortgage terms.

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