By Tony Freanisco, Personal Finance Writer at BorrowNow.ca · Published August 18, 2026 · Last updated August 19, 2026
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.
At a glance: Fixed = same rate for the term · Variable = moves with the prime rate · Fixed gives certainty · Variable can cost less when rates fall · Your comfort with risk matters most
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.
Fixed and variable mortgage rates are priced from two different markets, which is why they do not always move together. Fixed mortgage rates follow Government of Canada bond yields: when investors expect higher inflation or more rate hikes, yields climb and new fixed offers climb with them, often weeks before any Bank of Canada announcement. Variable mortgage rates follow prime, which moves only when the Bank of Canada changes its policy rate at one of its scheduled announcement dates.
Your own file moves the number too. Lenders price each borrower against the market rate using credit history, income stability, the size of your down payment, and whether the mortgage is insured. That is why two buyers can be quoted different mortgage rates for the same house in the same week, and why comparing more than one lender is worth real money over a full term.
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.
Compare mortgage rates on the contract rate and the APR, not the posted rate. Posted rates are a lender’s sticker price; the contract rate is what borrowers actually sign, and the APR folds in certain fees so offers with different fee structures line up honestly. Federal disclosure rules require lenders to show the cost of borrowing in writing before you commit, and the Financial Consumer Agency of Canada publishes plain-language guides to every mortgage feature worth checking, from prepayment room to break penalties.
Small differences compound. As an illustration only, on a $400,000 mortgage amortized over 25 years, each full percentage point of interest changes the payment by roughly $220 a month, which is in the range of $13,000 over a single 5-year term. Comparing mortgage rates across several lenders is the rare financial chore with a five-figure payoff. Remember the federal stress test as well: lenders must confirm you could still carry the payments at a rate higher than the one in your contract, so the rate you qualify at is not the rate you pay.
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.
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 on BorrowNow to compare mortgage rates and features across licensed Canadian lenders from one place.
Ready to compare mortgage options? Explore fixed and variable mortgages and find the rate type that fits your plans.
Disclaimer: BorrowNow.ca is a matching service, not a lender or mortgage broker. Rates, terms, and approval are set by licensed Canadian lenders and depend on your credit, income, down payment, and property. Mortgage rules summarized here reflect published federal guidance and can change; confirm current details with your lender or CMHC. Borrow only what you can afford to repay.
