Fixed vs Variable Rate Mortgages
How to choose between fixed and variable in today's rate environment.
The core trade-off
Fixed-rate mortgages lock your rate for the term — predictable payments, no surprises. Variable-rate mortgages move with the Bank of Canada's overnight rate — payments adjust (or amortization extends, depending on the lender) when rates change.
Historical data on which wins
Over the past 40 years in Canada, variable has outperformed fixed about 70% of the time. That stat is real, but it includes a long-running rate-decline cycle. In rate-rising or rate-stable environments, fixed often wins or ties.
Penalty difference (a hidden tiebreaker)
Variable penalties are always 3 months' interest. Fixed penalties trigger IRD calculations that can be 5–10x higher at Big-Five banks. If there's any real chance you might break the mortgage mid-term, that penalty math often pushes the decision to variable.
Convertible variable mortgages
Most variable-rate mortgages can be converted to a fixed rate mid-term without penalty. This 'option value' is meaningful — if rates spike, you can lock without breaking the contract. Verify the conversion terms before signing.
Hybrid (50/50) mortgages
Some lenders offer mortgages split into fixed and variable portions. They're a compromise that few clients ultimately benefit from — usually better to pick one based on your specific risk tolerance and timeline.
Have questions about your situation?
Every mortgage file has its own story. A 15-minute call with Jay is enough to know your real options.