Choosing between fixed vs. variable mortgage rates is one of the biggest decisions a Canadian homebuyer makes. This guide explains how each works, the pros and cons, and how to decide which fits you.
The fixed vs. variable mortgage choice comes down to certainty versus flexibility. A fixed rate stays the same for your whole term, so your payment never changes. A variable rate moves up or down with your lender's prime rate, which follows the Bank of Canada — so your costs can fall, but they can also rise.
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A fixed-rate mortgage locks your interest rate for the length of the term — commonly 2 years, 3 years or 5 years. Your payment and the share going to principal vs. interest stay predictable, which makes budgeting easy.
A variable-rate mortgage is tied to your lender's prime rate. When the Bank of Canada moves rates, your interest cost moves too. Some variable mortgages keep your payment the same and adjust how much goes to principal; others change the payment itself.
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Fixed-rate — pros: payment certainty, easy budgeting, protection if rates rise. Cons: usually a higher starting rate, and breaking the term early can carry a larger penalty.
Variable-rate — pros: often a lower starting rate, you benefit if rates fall, and the penalty to break is typically smaller. Cons: your costs can rise with prime, which can strain a tight budget.
Historically, variable rates have often cost less over time — but "often" isn't "always," and the right answer depends on where rates go and how much payment uncertainty you can handle.
Think about three things:
There's no single right answer — only the one that fits your finances and temperament. Explore fixed mortgages and variable mortgages to compare your options.
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The questions Canadian homebuyers ask most.
Neither is universally better. Fixed gives payment certainty; variable can cost less if rates fall but rises if they climb. The right choice depends on your budget and risk tolerance.
Variable rates follow your lender's prime rate, which moves with the Bank of Canada's policy rate. When the central bank raises or lowers rates, your variable cost follows.
Breaking a fixed mortgage early usually carries a larger penalty (often an interest-rate differential), while variable penalties are typically smaller — often about three months' interest.
Many variable mortgages let you lock into a fixed rate during the term. Check your specific terms, as conditions vary by lender.
It depends on your plans and rate outlook. Common fixed terms are 2-year, 3-year and 5-year.
Yes — stronger credit and finances generally earn better rates. Lenders also consider your down payment, income and the property.
Explore fixed and variable mortgages and find the rate type that fits your plans.
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