Dibz1-year fixed mortgage rates in Canada (2026): how they work
How 1-year fixed mortgage rates in Canada are priced, posted vs actual rates from Bank of Canada data, who a 1-year term suits, penalties and a payment example.
A 1-year fixed mortgage locks your interest rate for twelve months, then you renew. On September 30, 2026 the chartered banks' posted 1-year rate was 5.49%, but borrowers rarely pay the posted figure: in July 2026, the latest month the Bank of Canada has published, new insured fixed mortgages of 1 to 3 years averaged 4.88% and uninsured ones 5.31%.
On average it costs more than a 3- or 5-year fixed right now, yet some borrowers pick it on purpose. Here's why.
- Posted 1-year (chartered banks)
- New uninsured, fixed 1 to <3 yrs
- New insured, fixed 1 to <3 yrs
Posted series V80691333. New-loan averages are the Bank of Canada's monthly average rates on residential mortgages advanced (series V122667776–V122667786), published about two months behind. July 2026 is the latest new-loan month: posted 5.49%, uninsured 5.31%, insured 4.88%.
Source: Bank of Canada (free at bankofcanada.ca)
Show the numbers
| Posted 1-year (chartered banks) | New uninsured, fixed 1 to <3 yrs | New insured, fixed 1 to <3 yrs | |
|---|---|---|---|
| Sep 2024 | 7.2% | 5.5% | 5.9% |
| Oct 2024 | 7.2% | 5.3% | 5.7% |
| Nov 2024 | 7.2% | 5.3% | 5.6% |
| Dec 2024 | 7.2% | 5.4% | 6% |
| Jan 2025 | 7.2% | 5.7% | 5.9% |
| Feb 2025 | 7% | 5.8% | 5.8% |
| Mar 2025 | 7% | 5.6% | 5.7% |
| Apr 2025 | 6.1% | 5.5% | 5.7% |
| May 2025 | 6.1% | 5.4% | 5.4% |
| Jun 2025 | 6.1% | 5.4% | 5.3% |
| Jul 2025 | 6.1% | 5.3% | 5.1% |
| Aug 2025 | 6.1% | 5.3% | 5.4% |
| Sep 2025 | 6.1% | 5.4% | 5.5% |
| Oct 2025 | 6.1% | 5.4% | 5.2% |
| Nov 2025 | 5.8% | 5.5% | 5.3% |
| Dec 2025 | 5.8% | 5.5% | 5.3% |
| Jan 2026 | 5.8% | 5.5% | 5.2% |
| Feb 2026 | 5.8% | 5.5% | 5.3% |
| Mar 2026 | 5.5% | 5.3% | 5.2% |
| Apr 2026 | 5.5% | 5% | 4.6% |
| May 2026 | 5.5% | 5.3% | 4.8% |
| Jun 2026 | 5.5% | 5.3% | 5% |
| Jul 2026 | 5.5% | 5.3% | 4.9% |
What a 1-year fixed mortgage is
The term is the length of your contract with the lender. The amortization (often 25 years, or up to 30 in some cases) is how long the whole loan would take to repay. With a 1-year term, the rate and payment are fixed for a year; at the end you owe the remaining balance and either renew with your lender, switch to another one, or pay it off.
In practice it behaves a little like a variable rate that resets once a year instead of whenever prime moves.
Who a 1-year term suits, and who it doesn't
It can make sense for:
- Borrowers expecting a change soon. A planned sale, an inheritance or a large bonus you intend to put on the mortgage. A short term keeps the exit cheap.
- People who think rates will be lower next year and want to reprice quickly without the swings of a variable payment in the meantime.
It tends to be a poor fit for:
- Tight budgets. Your payment can jump at every renewal, and you face the same uncertainty twelve times in a decade instead of two.
- Anyone who values a set-and-forget plan. Each renewal means paperwork, comparing offers and, if you switch lenders, possibly legal fees.
How 1-year fixed rates are set
Fixed mortgage rates follow the cost of money for a similar period. For a 1-year term, lenders look at short-term funding costs: one-year Government of Canada yields, deposit rates such as 1-year GICs, and where markets expect the Bank of Canada's policy rate to go over the next year. They add a margin for risk, operating costs and profit.
That is why short fixed rates react quickly when the Bank of Canada cuts or raises. The posted 1-year rate fell from 7.24% in September 2024 to 5.49% by March 2026 as the policy rate came down; prime moved from 6.45% to 4.45% over a similar stretch.
Posted vs discounted 1-year rates
The Bank of Canada publishes two kinds of numbers we use here:
- Posted rates: the typical rate the big chartered banks advertise. Think of it as a list price.
- Average rates on new mortgages: what lenders actually charged on loans they advanced in a month. The Bank groups terms into buckets, and a 1-year fixed sits in "1 to less than 3 years", alongside 2-year terms.
The gap between the two has narrowed. In July 2026 the posted 1-year rate was 5.49% while new uninsured loans of 1 to 3 years averaged 5.31%, a difference of under 0.2 points. For 5-year terms the gap is closer to two points (see our 5-year fixed guide). Short terms are often discounted less than 5-year terms.
Don't confuse it with the "under 1 year" bucket (7.41% insured in July 2026), which covers 6-month and other very short products and prices far higher.
Insured vs uninsured pricing
With less than 20% down, your mortgage must carry default insurance (CMHC, Sagen or Canada Guaranty). The insurer bears the loss if you default, so lenders price insured loans lower: in July 2026, insured 1-to-3-year fixed mortgages averaged 4.88% against 5.31% uninsured.
Prepayment, penalties and renewal
Breaking a fixed mortgage early usually costs the greater of three months' interest or the interest rate differential (IRD), which compensates the lender for the rate it loses by re-lending your money. With only months left on a 1-year term, the IRD is usually small, so the penalty is often close to three months' interest. Most closed mortgages also let you prepay a share of the principal each year without penalty; the limit varies by lender.
At renewal you can shop around. Federally regulated lenders must send your renewal statement at least 21 days before the term ends. Since November 2024, borrowers who switch lenders at renewal without adding to the loan or stretching the amortization generally don't have to requalify under the stress test.
For a new purchase or refinance, you'll be qualified at the greater of your contract rate plus 2 points or 5.25%. At 4.88%, that means 6.88%.
Worked example: $500,000 over 25 years
Using the July 2026 averages and Canadian semi-annual compounding:
| Rate | Monthly payment | Balance after 1 year |
|---|---|---|
| 4.88% (average new insured, 1 to 3 years) | $2,874 | $489,436 |
| 5.49% (posted 1-year) | $3,049 | $490,314 |
| 6.88% (stress-test rate at 4.88%) | $3,465 | qualifying only |
At 4.88%, you would pay about $23,924 in interest in the first year. If you then renewed the $489,436 balance over the remaining 24 years, the payment would be $2,606 at 3.88%, $2,874 at 4.88% and $3,154 at 5.88%. That spread of about $550 a month is the yearly gamble a 1-year term asks you to take.
Try our mortgage calculator to run your own numbers with this week's Bank of Canada averages.
Related reading
Compare the 2-year and 3-year fixed terms, or the 5-year variable if you want a rate that moves with prime. For how individual lenders present their rates, see our pages on RBC, TD and Tangerine.
FAQ
What is the average 1-year fixed mortgage rate in Canada?
The Bank of Canada doesn't publish a 1-year-only average. Its closest figure covers fixed terms of 1 to less than 3 years: in July 2026, new insured mortgages averaged 4.88% and uninsured ones 5.31%. The chartered banks' posted 1-year rate was 5.49% on September 30, 2026.
Is a 1-year fixed cheaper than a 5-year fixed?
Not at the moment. In July 2026, new insured fixed mortgages of 5 years and over averaged 4.05%, well below the 4.88% for 1-to-3-year terms. That relationship can flip when markets expect rates to fall sharply.
What is the penalty for breaking a 1-year fixed mortgage?
Usually the greater of three months' interest or the interest rate differential. Because a 1-year term has little time left to run, the penalty is often close to three months' interest, but each lender calculates it its own way.
Do I have to pass the stress test every year when I renew?
No. Renewing with your current lender doesn't require it, and since November 2024 a straight switch to a new lender at renewal generally doesn't either. Borrowing more or extending the amortization does.
Rates shown are Bank of Canada averages, not offers. Talk to a licensed mortgage professional before choosing a term.
Dibz is a home search app for the Greater Toronto Area, built on the live TRREB MLS® feed. We write these guides from what we see in the market every day and check every rule and number against official sources, listed at the end of each article. Charts marked "Dibz analysis" are calculated from active MLS® listings on the date shown.
Keep reading
10-year fixed mortgage rates in Canada (2026): the long lock
10-year fixed mortgage rates in Canada: how they price against the 5-year, what a decade-long rate costs, the year-five penalty rule and a payment example.
2-year fixed mortgage rates in Canada (2026): what to know
2-year fixed mortgage rates in Canada: how they price against 1- and 3-year terms, insured vs uninsured averages, penalties, renewal and a payment example.
3-year fixed mortgage rates in Canada (2026): a middle path
3-year fixed mortgage rates in Canada: the posted rate vs what borrowers really pay, why the term is popular, penalties, renewal and a worked payment example.