1-Year Fixed vs 5-Year Fixed Mortgage Canada

Total cost comparison — which term is better in today's Canadian rate environment?

The Core Tradeoff: A 1-year fixed rate is typically higher than a 5-year fixed (in 2026, approximately 0.70–0.90% higher). But if rates fall over 5 years, renewing annually could result in lower total interest than locking into 5 years. This calculator models both scenarios.

1-Year vs 5-Year Fixed Comparison Calculator

Compare Total Cost Over 5 Years

1-Year Fixed vs 5-Year Fixed: The Full Analysis

The choice between a 1-year and 5-year fixed mortgage has become one of the most debated questions in Canadian personal finance. For years, the conventional wisdom was "5-year fixed is safe and smart." But analysis shows that short-term renewals often beat 5-year terms over long periods — at the cost of renewal uncertainty and potential for higher payments if rates spike.

Why 1-Year Fixed Rates Are Higher Than 5-Year in 2026

Normally, you'd expect shorter terms to have lower rates (less risk for the lender). But in 2026, Canada's yield curve is somewhat inverted or flat — 1-year fixed rates are higher than 5-year fixed. This reflects market expectations that interest rates will fall over the next 5 years, so lenders price short-term rates based on today's elevated rate environment, while long-term rates reflect the expectation of future rate declines.

1-Year Fixed: Choose If...

  • You expect rates to fall significantly over 5 years
  • You plan to sell your home within 1–3 years
  • You want flexibility to renegotiate annually
  • You're comfortable with renewal uncertainty
  • You have a higher risk tolerance

5-Year Fixed: Choose If...

  • You value payment certainty over 5 years
  • You believe current rates represent fair long-term value
  • You want to eliminate renewal stress for 5 years
  • You have a tight budget where payment surprises hurt
  • You're worried rates could spike unexpectedly

Historical Evidence: Does Short-Term Renewing Beat Long-Term?

Academic research and mortgage analysis in Canada generally shows that variable-rate and short-term fixed mortgages outperform 5-year fixed mortgages over long periods. The reason: mortgage lenders price in a premium for certainty. Borrowers willing to accept renewal risk are, on average, rewarded with lower total interest costs. However, "on average" doesn't help if you renew at a terrible time — the 2022–2023 rate spike was punishing for those who had to renew into high rates.

The Current Opportunity: Rate Inversion

In 2026, the rate inversion (1-year > 5-year) creates an interesting dynamic. If you take a 1-year at 5.09% vs. a 5-year at 4.29%, you're betting that when you renew in 12 months, rates will be below approximately 3.89% (to make the total 5-year cost equal). That's a significant drop — possible, but not guaranteed. The 5-year fixed at 4.29% represents decent value if today's rates represent a reasonable equilibrium.

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Last updated: March 2026. Not financial advice. Consult a mortgage advisor for personalized recommendations.