Fixed vs. variable is the question I get most often, and the way most people frame it is wrong. They want a forecast. Forecasts are noise. The honest framing I give every client: if a worst-case payment shock would force you to sell or miss a bill, you cannot afford the savings of variable. If you can absorb the shock, variable historically wins. Match the product to the life, not the market.
Leah's take, from the press
The Toronto Star ran my commentary in February 2026 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. You still need a budget that survives the worst-case payment, not the marketing rate.
How each one actually works
Fixed-rate mortgage
Your interest rate is locked in for the entire term (typically 1 to 5 years, though 7- and 10-year terms also exist). Your payment never changes. If rates drop, you don't benefit. If rates rise, you're protected.
Variable-rate mortgage
Your rate is set at "prime minus X%" — where X is negotiated at the start. The prime rate moves with the Bank of Canada's policy rate, so your interest cost rises and falls with the broader market. Within that, there are two flavors:
- Adjustable-rate mortgage (ARM): Your monthly payment changes as rates move. Rate goes up, payment goes up.
- Variable-rate mortgage (VRM): Your monthly payment stays the same, but the split between principal and interest shifts. Rate goes up, more of your payment goes to interest and less to principal.
An important distinction
Most Canadian "variable" mortgages are technically VRMs — fixed payment, shifting split. This means a rising-rate environment can push you toward your "trigger rate" where the interest alone exceeds your payment. We'll always explain exactly which product you're signing.
When fixed usually wins
- You want certainty. If the idea of your payment changing keeps you up at night, pay the small premium for peace of mind.
- You're on a tight budget. Every dollar of payment volatility matters when your margin is thin.
- Rates are historically low and rising. Locking in a low rate at the start of a tightening cycle can save thousands over the term.
- Short time horizon. If you'll be selling in 2-3 years, you want no surprises between now and then.
When variable usually wins
- Historical data. Over the past 30 years, variable rates have beaten fixed about 85% of the time — in normal economic conditions.
- Rates are peaking or falling. If we're late in a tightening cycle, riding rates down saves money.
- You have buffer. If you can comfortably absorb a 1-2% rate increase, the savings in stable or falling rate environments usually outweigh the risk.
- Flexibility matters. Variable mortgages typically have smaller penalties (3 months of interest) if you break the term early, vs. fixed which uses an "Interest Rate Differential" that can be brutally expensive.
The penalty math most people miss
If life changes — you move, refinance, or need to restructure — the penalty to break your mortgage early is where fixed vs. variable really diverges.
Example: $500,000 mortgage, 4 years into a 5-year term
On a variable mortgage, the penalty is typically 3 months' interest — around $4,500. On a fixed mortgage, if rates have dropped since you signed, the penalty could be $15,000-$25,000+ due to the Interest Rate Differential (IRD) calculation. This is often the deciding factor for clients who aren't 100% sure they'll stay put for the full term.
My honest take
If you're not sure, here's the default I usually suggest to clients: a fixed-rate mortgage when rates are low or rising, variable when rates are high or falling. And no matter which you choose, make sure the mortgage itself is flexible — prepayment privileges, portability if you move, and a reasonable penalty structure matter more than a 0.1% rate difference.
Frequently Asked Questions
Can I convert from variable to fixed later?
Most lenders allow this at any time, at current fixed rates. There's typically no penalty, but you lock in whatever fixed rate is available that day — not your original rate.
What's a "hybrid" mortgage?
Some lenders offer split mortgages where part is fixed and part is variable. They can work for hedging, but the complexity usually isn't worth it unless you have a specific reason. I'll tell you if it fits your situation.
How do I know what my "trigger rate" is on a VRM?
Your trigger rate is the point where your fixed monthly payment no longer covers the interest. It depends on your rate, amortization, and payment amount. If you're in a VRM, I'll calculate yours so you know where the ceiling is.
If I choose fixed, should I go 3 or 5 years?
Depends on where rates are. If the yield curve is flat (3- and 5-year rates are close), a 5-year gives you more certainty. If 5-year rates are significantly higher, a 3-year might be worth the extra risk of renewing sooner. We'll look at the current environment together.
Not sure which is right for you?
Send me your situation and I'll give you my actual read — not a forecast, but a fit assessment. Ten minutes on the phone usually gets us most of the way there.
These are educational estimates. Lender criteria, government program limits, insurance premiums, and qualifying rules all change. For an accurate quote for your situation,
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