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Rates are based on a home value of $500,000
Rates are based on a home value of $500,000
Updated
A 6-month fixed closed mortgage rate, while being the least flexible rate, can offer peace of mind to the borrower. It allows you to lock in a mortgage rate so that it remains unchanged during the 6-month term and offers a fixed payment schedule that does not fluctuate.
Open mortgages are flexible and often work for shorter-term loans. Generally, rates are higher in open mortgages because you are paying for the flexibility of payment and refinancing without penalties for early full payment.
Closed mortgages offer less flexibility than open mortgages. As a result, the interest rates are lower than closed rates but there is no possibility for refinancing, early payment or full payment without being charged extra fees. Closed mortgages also provide peace of mind with stable, fixed payment schedules that allow borrowers to budget accordingly based on their financial situations.
The Bank of Canada has been raising interest rates since March 2022 to curb a once-in-a-generation inflation spike. As rates have gone up mortgage borrowers have been wary about taking long term loans given the high interest rate and mortgage payment schedule.
A 6-month fixed closed rate appeals to borrowers because it allows flexibility to see where rates are going, can be refinanced at any time should rates go down, and can be paid at any time without penalty. For those waiting on the sidelines, it is a good option to ride out market volatility.
As the Bank of Canada changes its overnight lending rates to banks, banks and other mortgage lenders adjust their rates accordingly. Recently, interest rates have been on the rise and so 6-month fixed closed rates have also risen since last spring.
The sensitivity to the Bank of Canada’s decisions goes both ways as rates can come down if and when inflation is eased, and interest rates start heading lower. Bank of Canada's overnight lending rate can influence the yield on Treasury bill, in turn affecting mortgage rates. While Treasury bill yields can provide insight into the direction of interest rates, it is not the only fact that impacts mortgage rates. In Canada, the yield on government bonds, particularly long-term bonds, is often used as a benchmark for setting mortgage rates. When the yield on government bonds rises, mortgage rates may also rise, and when the yield on government bonds falls, mortgage rates may also fall.
Treasury bills are short-term debt securities issued by the Government of Canada, and their yields can influence the interest rates for mortgages, which are longer-term loans.
When Treasury bill yields rise, it generally means that investors are demanding a higher return for lending money to the government, and this can lead to an increase in interest rates for other types of loans, including mortgages. On the other hand, when yields fall, it generally leads to a decrease in interest rates for mortgages.
| Date | Bank of Canada overnight rate | 6-month Treasury bills yield |
|---|---|---|
| 2/2/2022 | 0.25% | 0.58% |
| 3/9/2022 | 0.5% | 0.83% |
| 4/20/2022 | 1.00% | 1.63% |
| 6/8/2022 | 1.50% | 2.33% |
| 7/20/2022 | 2.50% | 3.05% |
| 9/14/2022 | 3.25% | 3.63% |
| 11/2/2022 | 3.75% | 4.03% |
| 12/14/2022 | 4.25% | 4.23% |
Source: Bank of Canada
Advantages of a 6-month closed mortgage:
Cons of a 6-month closed mortgage:
It’s difficult to predict how the Bank of Canada will stand on interest rates in the near future but a lot depends on what the state of inflation, and overall economic picture.
Most economists see perhaps one more rate hike as inflation has peaked and started to abate on a global scale. Should this occur, rates will eventually come down and 6-month fixed closed mortgage rates would come down with it. The good news for borrowers is that 6 months is a short-term loan and should rates fall they would be able to take advantage of better refinancing options sooner rather than later.
For borrowers looking for shorter-term 6-month fixed mortgages some tips are:
Find answers to all your 6-month fixed closed mortgage rate related questions here.
Finding the best 6-month fixed closed mortgage rates in Canada starts with comparison shopping. RATESDOTCA can provide current 6-month fixed closed mortgage rates by the top lenders. You’ll sleep better knowing you are getting the best possible rates in the most efficient way possible.
6-month fixed closed mortgage rates are much like longer-term fixed mortgages. You can renegotiate at the end of the term, you can take out a longer mortgage if necessary, or you can pay it out in full without penalty.
6-month fixed closed mortgage rates are short term loans that provide stable, locked-in interest rates on a payment schedule. Refinancing can occur at the end of the term. Breaking the term to refinance will result in penalties but could be worthwhile only if interest rates are low enough to offset the penalty.
Generally speaking, 6-month fixed closed mortgage rates are not higher than other rates. In fact, the open version of the same term is usually higher due to its flexibility and open payment plan.
A mortgage rate lock allows borrowers to fix or lock-in a mortgage rate from the time an offer is made until closing occurs. Usually, the lender will put a time limit on the lock, but it allows borrowers to pursue their purchase and budget their payments according to the locked-in rate. Sometimes rates can come down during that period which may mean you will pay more than someone taking out a mortgage at the same time. Talk to your lender to see if this option is right for you.
Joel Kranc is a freelance writer and content provider who has worked with RATESDOTCA since 2019. He holds an MA in political science from the University of Toronto and a film certificate from New York University.
He has been published in and worked for such companies as CNN, Rogers Media, Institutional Investor Magazine, The Globe and Mail, Infrastructure Investor, BenefitsPRO Magazine, Global Finance Magazine, With Intelligence, the CPP Investment Board, Hospitals of Ontario Pension Plan, and many more financial services and industry publications.
He is the author of "Retirement Planning in 8 Easy Steps," which, when released in 2015, was No. 11 on the Publisher's Weekly US Bestseller List for Business and Finance, beating out Mark Cuban's "How to Win at the Sport of Business."
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