Why the answer is rarely about where rates are headed.
Fixed vs. variable is the question I get asked most often. It's also the one most people frame wrong. They want a forecast. The right framing isn't a forecast at all.
Here's the question I actually ask every client before I give them a fixed-or-variable recommendation: "If your payment went up 30% next year, does anything in your life have to change?"
If a 30% payment shock would force a sale, force a missed bill, or force a fight at the kitchen table, you can't afford the savings of variable. The math of variable historically wins, but the variance kills you. Fixed buys you predictability. Predictability is worth real money when your budget has no slack.
If a 30% payment shock would be uncomfortable but absorbable — you'd pause restaurant meals, postpone a vacation, dip into emergency savings — variable is usually the right call. Variable historically saves 50-150bps over a five-year term. Over a $700K mortgage, that's $20K-$50K of real money over five years.
The decision isn't where rates are going. It's whether your life can absorb the path between here and there.
The Toronto Star ran my commentary on variable-rate mortgages rising in popularity as global turmoil pushed up fixed rates. The point I emphasized: variable's appeal grows when the gap between fixed and variable widens. But the discipline question doesn't change with the gap. You still need a budget that survives the worst-case payment, not the marketing rate.
"Variable" in Canada means two different things, and the distinction matters:
Most Canadian "variable" mortgages are technically VRMs. The trigger-rate dynamic is what made the 2022-2023 rate cycle so painful for variable holders — their payments stayed flat for months while their amortization quietly extended. Make sure you know which product you're actually signing.
Once you've answered the fit question, term length is the next decision. My rule of thumb: match the term to the part of your life you can predict. If the next two years are uncertain (job change, relocation, expanding family), don't lock yourself into a 5-year term with a high IRD penalty. A 2- or 3-year term costs you maybe 15bps in rate and gives you flexibility. That's almost always worth it.
Don't pick fixed or variable based on a rate forecast. Pick the one that fits your budget's resilience. The right answer is the product that lets you sleep at night with the variance of your life included — not just the rate path you happen to be hoping for.
Ten minutes on the phone usually gets us to the right answer for your specific situation.