If you’re shopping for a mortgage in 2025, chances are you’ve been offered a 5-year fixed rate — it’s still the most common mortgage term in Canada. But is it still the best option?
That depends on your financial goals, your tolerance for risk, and where you think interest rates are headed. Let’s break it down.
TL;DR: Is a 5-Year Fixed a Good Deal in 2025?
- It’s a good deal if you value stability and plan to stay in your home for at least 5 years
- It may not be ideal if rates are expected to fall or you need more flexibility
- As of 2025, some homeowners are considering shorter terms or hybrid options instead
What Is a 5-Year Fixed Mortgage?
A 5-year fixed mortgage locks in your interest rate for five years. Your monthly payments stay the same for the full term, no matter what happens with market rates.
In contrast, a variable-rate mortgage can fluctuate during the term, often following the Bank of Canada’s changes to the prime rate.
Why Most Canadians Still Choose It
- Predictable payments – no surprises, even if rates jump
- Easier budgeting – especially helpful for first-time buyers or growing families
- Often better rates than shorter terms – depending on lender offerings
Historically, 5-year fixed has been the default because it strikes a balance between stability and affordability. But 2025 is not a typical year.
What’s Happening with Rates in 2025?
In the past few years, Canadians experienced a sharp rise in interest rates, followed by a gradual stabilization. As of 2025, rates remain higher than pre-pandemic lows but are showing signs of leveling off.
Some economists predict minor cuts by the Bank of Canada later this year, while others suggest we may be in a “new normal” with mid-4% to mid-5% rates for the foreseeable future.
This uncertainty has many borrowers asking: should I lock in now, or wait it out?
When a 5-Year Fixed Makes Sense
- You plan to stay in your home for 5+ years
- You’re risk-averse and don’t want to gamble on rate changes
- You expect rates to rise or stay flat, not fall
- You want to avoid potential payment shocks
When You Might Want Something Else
1. You Expect Rates to Drop
If you believe interest rates will fall over the next 1–2 years, a shorter-term fixed or variable mortgage may save you more in the long run.
2. You Need Flexibility
If you’re unsure whether you’ll move or sell within 3–5 years, locking into a 5-year term could mean facing penalties if you break the mortgage early.
3. You Want to Hedge Your Bets
Some lenders now offer hybrid or combo mortgages where part of your loan is fixed and part is variable — a middle ground for uncertain times.
What Are the Alternatives in 2025?
- 2- or 3-Year Fixed: Popular with buyers waiting for lower rates
- 5-Year Variable: Can offer lower upfront rates but higher risk
- HELOCs or Adjustable-Rate Mortgages: Flexible, but rates can rise unexpectedly
- Hybrid Mortgages: Combine fixed and variable elements
Local Insight: What We’re Seeing in Guelph and Area
Many of our clients in Guelph, Elora, and Fergus are still choosing 5-year fixed terms — especially those locking in at renewal or buying a long-term home. Others are going shorter-term, betting on lower rates in 1–2 years. Every situation is different, and it helps to compare actual numbers, not just trends.
Final Thought
A 5-year fixed mortgage is still a solid choice in 2025 — but it’s no longer the automatic best pick for everyone. The key is to align your mortgage term with your personal timeline and risk comfort.
Want help crunching the numbers and comparing term options? Contact The Local Broker and we’ll walk you through it.
