Fixed vs Variable Mortgage Rates in Canada

A fixed-rate mortgage keeps the same interest rate for the entire term, often five years. Your payment stays the same, which makes it easy to budget and to sleep at night. Fixed rates tend to be higher than variable rates at the start, because you are paying for that stability.

A variable-rate mortgage is linked to your lender's prime rate, which in turn moves with the Bank of Canada's policy rate. When prime changes, either your payment changes or the interest portion of your payment adjusts, depending on the mortgage type. Variable rates can save money when rates fall, but they can hurt your budget if rates rise quickly.

There is no universal "better" choice. If your budget is tight, you have a single income, or you simply value peace of mind, a fixed rate is often safer. If you have room in your budget and a long-term horizon, a variable rate can be attractive, especially in environments where rates are expected to fall or stay stable.

Some borrowers choose a hybrid, splitting their mortgage into fixed and variable portions. This can balance stability and flexibility. No matter what you choose, it's smart to stress-test your finances by seeing what your payment would look like a couple of percentage points higher.