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#1 Choice
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Smarter Loans

$50,000+
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4.39%
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National Bank

$50,000+
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5.39%
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Coast Capital

$50,000+
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5.35%
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Breezeful

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EQ Bank

$50,000+
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4.55%
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Tangerine

$50,000+
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5.45%
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Homewise

$50,000+
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Varies
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Meridian

$50,000+
Loan Amount
5.95%
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  • Get up to $5k cashback
  • Pay off up to 20% more each year
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$50,000+
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4.44%
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1-Year Fixed Rate Mortgage

The mortgage term is the length of time that your interest rate remains fixed, which in this case is one year. If you choose a mortgage with a fixed rate for one year, you will have the opportunity to switch mortgage types, providers, and rates at the conclusion of that year without incurring any fees or penalties. Your forecast for the direction of future interest rates should guide your decision on the length of the mortgage term.

For instance, if you believe that interest rates on mortgages will rise in the near future, you may want to choose a lengthier 5-year term in order to lock in the present low rate. On the other hand, you should think about getting a 1-year mortgage rate if you believe that interest rates will go down in the next year or if you want to renegotiate the terms of your mortgage in the following year.

1-Year Fixed Rate Mortgage - Comparewise

What’s A Good Mortgage Rate

The quick answer is the lowest potential rate for which you can qualify depending on the kind of mortgage you want and the amount of money you need to borrow. The more in-depth response to this question needs some background information on the topic.

You can see that although a mortgage rate of 5% in 2001 would have been a good deal compared to the average, it wouldn’t have been so wonderful in 2021. This is because the average rate has increased since 2001.

Even though it is widely anticipated that the Bank of Canada will raise interest rates throughout 2022 in order to account for inflation, looking back over the past few decades reveals that mortgage rates are still quite low by historical standards. This is despite the fact that it is widely expected that the Bank of Canada will increase interest rates in order to account for inflation.

Additionally, it is essential to bear in mind that the interest rate that is promoted by a lender is only the beginning of the narrative. Your credit score and the other personal financial variables you provide will be used to calculate the actual mortgage rate that will be given to you.

Top 1-Year Fixed Rate Mortgage Partners in CanadaGet a Rate
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Smarter LoansClick here >>
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National BankClick here >>
Coast CapitalClick here >>
EQ BankClick here >>
TangerineClick here >>
HomewiseClick here >>
MeridianClick here >>
MogoClick here >>

What Is A Decent Interest Rate For A 1-Year Fixed Rate Mortgage

A borrower’s ability to qualify for a certain mortgage rate will determine the interest rate that they will be offered. When deciding what interest rates to give customers, lenders consider a number of different criteria. These aspects are what a lender takes into consideration when determining a borrower’s creditworthiness and may help anticipate whether or not the borrower will be able to pay back their mortgage.

A homebuyer’s credit history and credit score, as well as their income and work status, as well as their debt service ratios, are some of the factors that lenders will consider. Borrowers who have a consistent income and a strong credit history will have an easier time qualifying for a favorable mortgage rate.

The Best Rates On a 1-Year Fixed-Rate Mortgages

In Canada, over 70% of all mortgages have a fixed interest rate. In addition, the five-year renewal option receives sixty percent of all votes. Because fixed rates are offered in any increment between one and ten years, it is our pleasure to analyze your choices and provide guidance for the period that is most appropriate for your specific requirements.

When you have a mortgage with a “fixed” rate, it indicates that your interest rate won’t change for the whole time you’re paying it off (the duration of the mortgage). The ‘term’ refers to the length of time that your current rate will be in effect, whilst the ‘amortization’ refers to the amount of time that it will take to pay off your mortgage in its entirety.

Even if you opt for a mortgage with a lower interest rate and a shorter term, it is imperative that you are aware of the fact that all borrowers are required to satisfy the standards of approval for the benchmark 5-year fixed qualifying rate set by the Bank of Canada. This criterion has been established to make sure that you can easily afford to repay your mortgage while also lowering the risk that the lender is exposed to.

The Advantages Of Having A Fixed Interest Rate

Choosing a mortgage with a fixed rate makes perfect sense if you want the peace of mind that comes with knowing precisely how much you will have to pay toward your loan on a monthly basis. This is because you will have a defined period during which your payments will not fluctuate.

In point of fact, you should consider a fixed rate to be assured that your rate will not increase throughout the course of the period that you have chosen (1-10 years). Homebuyers who are searching for a reliable payment schedule, homeowners who maintain a tight monthly budget, and buyers who are typically more cautious are all good candidates for fixed-rate mortgages.

For instance, young families who have significant mortgages in comparison to their income may be better off choosing a fixed rate since it would offer them the peace of mind that they need.

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The Popularity Of The 1-Year Fixed-Rate Mortgage

The option of a fixed rate for a period of five years is without a doubt the one that is picked the most often by Canadian homeowners; nevertheless, this does not necessarily mean that it is the best decision.

Your choice needs to be determined by the level of risk you are willing to take, in addition to your capacity to weather rises in mortgage payments. In situations like these, the assistance of our knowledgeable staff is more important than before. Borrowers often choose for a period of one year for the loan for one of the following three reasons

  • You intend to “flip” the house, which means you will buy it for a low price, make improvements to it, and then sell it for a higher price in order to make a profit
  • You anticipate a decline in interest rates within the next year
  • You are unsure of how long you will continue to live in the house after the first year. In the event that you choose a mortgage with a longer term and then decide to prepay it, you will be subject to financial penalties.

1-Year Fixed vs. Longer-Term Mortgage Rates

Mortgage rates that are set for one year are often cheaper than mortgage rates that are fixed for longer durations, such as five or ten years. This is because loans with longer fixed-rate periods guarantee a lower interest rate for a greater portion of the loan’s duration.

That could be wonderful for you, but it exposes your lender to the possibility of their interest rates going up. Because of this, the higher rate is reflective of the expense involved with securing the present rate for a longer time period, which is reflected in the higher rate. These correlations are not always stable, however, particularly in contexts with a very low or very high rate of occurrence.

You should always make your decision on which term is suitable for you depending on the current market conditions as well as your current situation. Because they intend to relocate within the next year, some homeowners choose to lock in their mortgage rate for only one year.

The issue with using this tactic is that if the homeowner does not plan on relocating within the next calendar year, they may be subject to financial penalties for prepaying their mortgage. As a result, it is common sense to choose a mortgage rate that is variable in this scenario. This is due to the fact that the refinance penalty, which consists of three months’ worth of interest, is often smaller than that of refinancing a fixed mortgage.

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Pros Of Having A 1-Year Fixed Rate Mortgage

A mortgage with a fixed rate for one year offers a number of benefits, including the following

  • When opposed to longer durations, shorter terms often have more favorable pricing options. When compared to the rates for other short durations, such as two and three years, the prices for a single year may often represent significant savings.
  • With a lower probability of having to pay prepayment penalties, locking into a longer fixed term may result in large penalties in the event that you need to break your mortgage early. If you choose a term that is just one year long, the chances that you will have to terminate your mortgage prior to the conclusion of the term are greatly decreased.
  • A good option for those who just need a mortgage for a limited time: If you will only need a mortgage for around a year, a term of one year could be the best option for you. Real estate flipping, credit rehabilitation, and individuals with very little time left on their amortizations are typical instances.

Cons Of Having A 1-Year Fixed Rate Mortgage

The following is a list of possible negatives associated with selecting a mortgage with a term of one year fixed

  • Limited protection against increases in interest rates: If interest rates go up, you will not be as protected as you would be with a longer fixed term.
  • Choosing a longer term with a somewhat higher interest rate, such as the five-year mortgage, is something that a lot of individuals do in order to avoid what they perceive to be the trouble of always having to renew their mortgage.
  • Depending on the specifics of your situation, a one-year term could be a reasonable choice for a single instance, but selecting one-year periods on a consistent basis might make the renewal process rather challenging.
  • Switching charges: If you choose a short-term, such as the 1-year fixed, you are more likely to incur moving expenses if you wind up switching lenders often. This is especially true if you choose consecutive periods with the same short term.

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Offers shown here are from third-party advertisers. We are not an agent, representative, or broker of any advertiser, and we don’t endorse or recommend any particular offer. Information is provided by the advertiser and is shown without any representation or warranty from us as to its accuracy or applicability. Each offer is subject to the advertiser’s review, approval, and terms. We receive compensation from companies whose offers are shown here, and that may impact how and where offers appear (and in what order). We don’t include all products or offers out there, but we hope what you see will give you some great options.

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September 23, 2022
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FAQs about 1-Year Fixed Rate Mortgages

How much can I save compared to 1-year fixed rates?

A better interest rate may save you thousands of dollars, even over the course of just one year on your mortgage, which is likely to be the single greatest financial commitment you'll ever make in your life. A mortgage with even a somewhat cheaper interest rate may result in significant savings, particularly towards the beginning of the loan's term.

Are 1-year mortgages better than other mortgage terms?

The terms of a mortgage with a year-long term are not always superior to those with other periods. You should choose a term length that is appropriate for your present and future financial requirements, as well as the rates that are currently available. The majority of leases in Canada are for a period of five years since this length of time strikes a balance between security and adaptability. On the other hand, if adaptability is a priority for you, a term of one year could be something to think about.

How do I qualify for a mortgage?

You need to pay close attention to the bare minimums that must be met before your mortgage application can even be processed. This is true even if it's crucial to think about qualifying for the greatest rates. Here are some of the most crucial items that potential mortgage lenders will want to examine in order to determine whether or not a borrower is qualified for a mortgage.

  • An adequate score on the credit bureaus
  • Proof of income
  • The ability to pass a mortgage qualification exam

How would a 1-year fixed-rate mortgage work?

If you were able to lock in the interest rate on your home loan for a whole year, the amount of interest that you pay would be consistent during that entire year. Therefore, regardless of whether or not interest rates go up or down throughout that year, your monthly repayments will remain the same. If you do not switch to a new plan before this first-rate expires, you will be put on to the usual variable rate that your lender offers at that point. If you wish to avoid the SVR by switching to another arrangement, the best time to start thinking about alternative choices is between six and nine months before your existing term expires. This will give you enough time to make the necessary preparations.

Can a lender charge a fixed-rate mortgage?

A rate of interest is said to be fixed if it does not go up or down in tandem with the prime rate or any other index rate, meaning that it remains relatively unchanged most of the time. However, this does not guarantee that your fixed rate will never change - a lender is permitted, under certain conditions, to adjust your fixed interest rate.

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