The most important decision you'll make after choosing your home. Learn the pros, cons, and real-world scenarios to pick the right mortgage type.
Want the actual dollar comparison?
Live broker rates · BoC rate-path scenarios · Penalty modelling
Your interest rate is locked in for the entire term (typically 1-5 years). If you choose a 5-year fixed at 4.5%, you'll pay 4.5% for all 5 years regardless of what happens in the market.
Rate is based on: Government of Canada bond yields at the time you lock in.
Example:
$400,000 mortgage at 4.5% = $2,218/month for 5 years guaranteed
Your rate fluctuates with the prime rate, expressed as "prime minus X%" (e.g., prime - 0.90%). When prime goes up, your rate goes up. When prime drops, so does your rate.
Rate is based on: Bank of Canada overnight rate, which influences prime.
Prime 6.70% - 0.90% = 5.80% today (but this rate can change)
The right choice depends on your personal circumstances, risk tolerance, and financial situation. Consider these factors:
Studies consistently show that variable-rate mortgages have saved borrowers money approximately 88% of the time over 5-year terms. However, past performance doesn't guarantee future results, and the ~12% of times fixed won included some significant rate spike periods.
In 2022-2023, variable-rate holders saw prime rate increase from 2.45% to 7.20% in just 18 months—the fastest increase in Canadian history. Those with variable rates saw payments jump significantly. This is the risk you accept with variable.
Can't decide? Consider these middle-ground options:
If you have a convertible variable mortgage, yes—you can lock into a fixed rate at any time. The fixed rate offered will be the lender's current rate for the remaining portion of your term. Non-convertible variables may require breaking and refinancing.
Adjustable Rate (ARM): Your payment changes when prime changes. If prime rises 0.25%, your payment immediately increases. Variable Rate (VRM): Your payment stays the same, but the portion going to interest vs. principal changes. VRMs can hit a "trigger rate" where minimum payments don't cover interest.
For VRM mortgages with static payments, the trigger rate is when 100% of your payment goes to interest and nothing to principal. When this happens, your lender may increase your payment, ask for a lump sum, or add the shortfall to your mortgage balance.
Fixed-rate penalties use the Interest Rate Differential (IRD) calculation, which compensates the lender for the interest they'll lose by releasing you from a higher rate contract. If you locked in at 5% and current rates are 4%, the lender loses 1% over your remaining term—they charge you for that loss.
There's no magic number, but consider: if variable is 1% lower than fixed, prime would need to rise approximately 1% (4 rate hikes) just to break even. If prime rises 2%, fixed would have saved you money. Your risk tolerance and rate expectations should guide your decision.
Our mortgage experts can walk you through both options based on your specific situation.
Pick a time that works best for you
