National Bank data signals a structural shift as Canadians move away from five-year fixed mortgages
Canada’s five-year fixed-rate mortgage has fallen to its lowest recorded share of new lending, according to a new National Bank of Canada report that points to a structural change in how quickly the Bank of Canada’s rate decisions reach household budgets.
“The five-year fixed-rate mortgage, long the preferred option for Canadians, has been losing ground for several years to shorter terms and, more recently, variable-rate mortgages,” said the Canada Watch research note authored by Daren King, senior economist at National Bank of Canada in Montreal.
Fixed-rate mortgages with terms of five years or longer fell to 8.8% of newly originated loans in July, the lowest level since records began in 2013, with the remaining 91.2% carrying shorter fixed terms or variable rates.
“In 2023 and 2024, borrowers primarily favoured shorter fixed terms, but these in turn lost ground in 2025 and 2026 to variable-rate mortgages,” the report said.
How the shift unfolded
The pricing backdrop has driven the change. Variable-rate products fell below fixed-rate options in late 2025 for the first time since 2022, according to Canada Mortgage and Housing Corporation (CMHC).
By February, variable-rate mortgages represented 42% of extended mortgages at chartered banks, consistent with broader industry analysis of how variable-rate mortgages could be set to surge in 2026.
Borrower sentiment followed quickly. Penelope Graham, mortgage expert at Ratehub.ca in Toronto, told Canadian Mortgage Professional that the momentum accelerated as rate cuts took hold.
“In 2025, borrower interest in variable rates rose as the Bank delivered additional rate cuts over the autumn months; on a year over year basis, the number of inquiries for variable-rate mortgages on Ratehub.ca increased by 25.7% year over year accounting for 11.5% of all inquiries, compared to just 7% in 2024,” Graham noted.
Separate platform data show variable mortgage demand rising while fixed products remained dominant at Rates.ca. The Bank of Canada has held its policy rate at 2.25% through multiple 2026 decisions.
What tighter monetary policy could mean for borrowers
The National Bank study identified a clear macroeconomic implication behind the shift.
“The more households opt for short-term or variable-rate financing options, the more quickly the Bank of Canada’s decisions are passed on to their mortgage payments,” the study said, adding that “the transmission of monetary policy could therefore accelerate compared to the past.”
That sensitivity cuts both ways. Should rate expectations tighten further, “a rise in financing costs could thus further dampen a residential market already grappling with modest activity and a less favorable demographic outlook,” the report warned.
For brokers advising clients on product selection, the shift reinforces the urgency of early rate risk conversations.
Canada’s outstanding mortgage stock has moved markedly away from its long-term fixed foundation over the past four years, a change that amplifies both the opportunities and the risks of the current rate environment.
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