Should I choose a fixed or variable mortgage in 2026?

It depends on three things: (1) where you think the Bank of Canada is heading — if cuts are likely, variable wins on rate; (2) your tolerance for payment volatility — fixed gives you a known monthly cost for the entire term; (3) the probability you'll break the mortgage early — variable penalties are 5–10× cheaper than fixed IRD. Historically, variable has won about two-thirds of the time over 5-year terms in Canada, but the last 3 years have been brutal for variable holders.

What is a trigger rate on a variable mortgage?

On a Variable Rate Mortgage (VRM) where your payment stays static, the trigger rate is the interest rate at which your scheduled payment no longer covers all the interest — meaning your balance starts growing. When this happens, your lender will require you to either increase payments, make a lump sum, or convert to a fixed rate. ARMs (Adjustable Rate Mortgages) avoid this because the payment changes immediately when prime moves.

How is the IRD penalty calculated on a fixed mortgage?

The Interest Rate Differential is roughly: (your contract rate − the lender's comparable posted rate today) × your balance × months remaining ÷ 12. Big banks typically use posted rates in this calculation, which inflates the penalty significantly. Monoline lenders (MCAP, First National, etc.) usually use discounted rates, producing far lower penalties. Always confirm the exact figure with your lender.

Can I convert from variable to fixed mid-term?

Yes — most variable mortgages in Canada are convertible to a fixed rate at any time without penalty, as long as the new fixed term is equal to or longer than the time remaining on your original term. The catch: you will be offered the lender's current fixed rate, not the rate you saw at origination. If rates have risen, the conversion can lock in a worse outcome than just riding the variable.

How often does the Bank of Canada change rates?

The BoC has 8 scheduled rate announcements per year, roughly every 6 weeks. Between meetings, rates only change in extraordinary circumstances. Each move is typically 25 basis points (0.25%), occasionally 50 bps in a fast-moving cycle. Your variable rate moves in lockstep with these decisions, since variable mortgages are priced as "prime minus a discount."

Has fixed or variable historically won in Canada?

Long-run studies (Milevsky, BoC) show variable beat fixed roughly 75–80% of the time on 5-year terms from 1950–2020. The 2022–2024 rate-hike cycle was a major exception — variable holders saw payments jump 50%+ and trigger-rate notices. Since the BoC began cutting in mid-2024, variable is back ahead on a rolling-cohort basis.

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Fixed vs Variable

Should you lock in fixed at 4.04% or ride variable at 3.50%? This calculator runs both side-by-side under your chosen rate path — with trigger rates, IRD penalties, and break-the-mortgage probability.

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Defaults sourced from today's broker rate table · Prime rate 4.45%

Mortgage Setup

Mortgage Amount

$100K$2M

Amortization (25 years)

Term Length (5 years)

Variable Mortgage Type

ARM Payment changes VRM Static payment

Today's Rates & Path

5-Yr Fixed Rate (%)

Live: National Bank

5-Yr Variable Rate (%)

Live: National Bank

Bank of Canada Rate Path Scenario

📊 Hold flat 📉 BoC cuts 📈 BoC hikes 🎚️ Custom

Cuts: −0.25% every 6 months for 18 months, then flat.

Probability You'll Break the Mortgage Early (30%)

CMHC: ~60% of Canadians break before maturity. Set higher if planning to move/refinance.

If You Break, Month (36)

Term-End Winner

Variable

Saves $0 over the term.

Fixed total interest

Variable total interest

Fixed end balance

Variable end balance

Monthly Payment Trajectory

Fixed Variable (rate-following)

Break-Even Rate Move

Calculating...

Penalty If You Break at Month 36

Fixed (IRD est.)

Variable (3-mo int.)

Fixed IRD uses a 2% spread proxy — confirm with your lender.

The Verdict (Probability-Weighted)

Calculating...

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A 10-minute conversation with a licensed broker can tell you exactly which lenders are offering the lowest fixed and variable rates right now — and which one fits your situation.

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Fixed vs Variable Mortgage in Canada: How to Choose

Every Canadian borrower asks the same question at application and renewal: fixed or variable? The honest answer is "it depends" — but it depends on math you can run in 30 seconds with this calculator. Three things drive the decision: where the Bank of Canada is heading, your tolerance for payment changes, and the probability you'll break the mortgage before the term ends.

What This Calculator Models

Live broker rates — defaults pull from the same source as our public rate table, refreshed daily.
BoC rate-path scenarios — Hold, Cuts, Hikes, or build your own custom path month-by-month.
ARM vs VRM — Adjustable Rate Mortgages flex the payment when prime moves; Variable Rate Mortgages keep the payment static and flex the amortization (until you hit the trigger rate).
Trigger rate detection — VRM warning when interest exceeds your scheduled payment.
IRD penalty estimation — fixed-rate IRD using a 2% spread proxy; variable always 3 months' interest.
Probability-weighted expected cost — combines the rate-path outcome with the chance you'll break early.
Canadian semi-annual compounding on the mortgage math.

When Variable Wins

Variable beats fixed when (a) the BoC is in a cutting cycle, (b) you're confident you'll hold to maturity (no penalty risk), and (c) the starting rate gap is meaningful (≥0.40% lower). Long-run Canadian data (Milevsky 2001, updated 2020) shows variable beating fixed roughly 75–80% of the time on 5-year terms — though the 2022–2024 hike cycle was a brutal exception.

When Fixed Wins

Fixed wins when (a) you're already at peak stress and another payment hike would break you, (b) you're early in a hiking cycle, or (c) the fixed-variable spread is unusually narrow. The hidden value of fixed isn't just the rate — it's the IRD penalty risk you take on. If you're 70%+ likely to break early (job change, growing family, downsizing), variable's 3-month interest penalty almost always saves you more than fixed saves on rate.

The Trigger Rate Trap

Variable Rate Mortgages with static payments (most big-bank variables) hit a "trigger rate" when interest exceeds your scheduled payment. At that point, your balance grows instead of shrinking — and the lender will demand a payment increase, lump sum, or fixed-rate conversion. Adjustable Rate Mortgages avoid this entirely by changing the payment with each prime move. If you choose variable, ARM is structurally safer.

→ Read the full Fixed vs Variable Guide · → Mortgage Penalty Calculator · → Renewal Calculator · → Today's Rates

⚠️ Important Disclaimer

This calculator provides estimates for educational purposes only. Actual rates, IRD penalties, and trigger rates depend on your specific lender, contract terms, and posted rates at the time of decision. Bank of Canada rate paths are user-defined assumptions, not forecasts. Always verify exact figures with a licensed mortgage broker before committing.