Can I switch from variable to fixed during my term?

Most lenders let you convert a variable mortgage into a fixed rate during the term without a penalty, at the fixed rate they offer at that time for a term at least as long as your remaining term. The catch is you must accept their posted conversion rate, which may not be their best. Ask before you sign how conversion works.

Which rate do most Canadians choose?

It shifts with the rate environment. When variable discounts are deep, more borrowers go variable; when fixed rates fall close to variable, many lock in for certainty. Popularity is not a strategy, though. The right answer comes from your budget, your plans for the property, and your tolerance for payment changes.

Does the Bank of Canada set my fixed mortgage rate?

Not directly. The Bank of Canada policy rate drives variable rates through lenders' prime rates. Fixed rates follow the bond market, mainly Government of Canada bond yields, which move on inflation and economic expectations. That is why fixed and variable rates can move in different directions in the same month.

MORTGAGE RATES · BY VISHVESH PATEL · NOV 13, 2026

Fixed vs Variable Mortgage in Canada: How to Choose

Short answer: Choose a fixed rate if payment certainty matters most and your budget has little room for increases. Choose a variable rate if you can handle payments that may rise or fall, value lower penalties, and accept uncertainty in exchange for flexibility. Neither is right for everyone, and the best choice is the one that fits your finances and your plans for the next five years.

How each rate works

Fixed rate

Your rate and payment stay the same for the whole term, commonly five years. You are protected if rates rise, and budgeting is simple. The trade-off is the penalty if you break the mortgage early: fixed-rate penalties use an interest rate differential calculation and can be very expensive, particularly with large banks.

Variable rate

Your rate moves with your lender's prime rate, which follows the Bank of Canada policy interest rate. When the Bank of Canada cuts, your rate falls; when it raises, your rate rises. Some variable mortgages keep your payment fixed and change how much goes to principal, while adjustable-rate mortgages change the payment itself. Penalties for breaking a variable mortgage are typically just three months of interest, far cheaper than fixed penalties.

What history suggests, and its limits

Over long periods, variable rates have often cost less than fixed rates, which is why many Canadians choose them. But history includes long stretches of falling rates, and the Bank of Canada raised rates rapidly in 2022 and 2023, which shocked many variable holders. Past patterns inform the decision; they do not decide it. Your own cash flow and sleep-at-night factor matter more than any forecast.

Four questions that actually decide it

Can your budget absorb a higher payment? If a 1 to 2 percent rise would strain you, fixed is safer.
Might you move, refinance, or sell during the term? If yes, the variable penalty advantage can save thousands.
How long do you expect to keep this home and mortgage? Shorter horizons favour flexibility.
Will rate news stress you monthly? Peace of mind is a real financial value, not a weakness.

A middle path some borrowers miss

You are not forced into an all-or-nothing bet. Shorter fixed terms, such as two or three years, reduce the time you are locked in. Some borrowers also make extra prepayments on a variable mortgage as if they were paying a higher fixed rate, building a buffer while keeping the lower penalty. We can model these options with your numbers.

What about the stress test?

Either way, the Government of Canada's stress test requires you to qualify at your contract rate plus 2 percent or the benchmark rate, whichever is higher. This protects you: your approval already assumes payments higher than today's. Remember that qualifying and being comfortable are different things, so we stress-test your budget honestly too.

Know about trigger rates if you choose a fixed-payment variable

Some variable mortgages hold your payment steady while the rate moves, changing only how much of each payment covers interest. If rates climb far enough, you can reach a trigger rate where your payment no longer covers even the interest, and the lender will raise your payment, ask for a lump sum, or convert you to fixed. This surprised many borrowers in 2022 and 2023. If your variable mortgage has fixed payments, ask exactly where your trigger point sits and how much room you have before reaching it.

The bottom line

Fixed buys certainty, variable buys flexibility, and penalties often matter more than the headline rate. If you want to compare fixed and variable options for your exact mortgage, book a free call with me, Vishvesh Patel. I will show you the payments and penalties side by side, and there is no cost to you for my service.