A fixed-rate mortgage locks your interest rate and payment for the whole term, while a variable-rate mortgage follows the prime rate (about 4.45% in 2026) and moves with the Bank of Canada. Track the source rate on our live rate tracker.
Fixed mortgages give you a locked payment for the term — best for stability. Variable mortgages follow prime (≈4.45% in 2026), so payments can fall if the Bank of Canada cuts or rise if it hikes. Choose fixed for peace of mind, variable if you can handle movement and expect rates to drop. This is not financial advice.
With a fixed-rate mortgage, your interest rate is set for the entire term — commonly one to five years in Canada. Your regular payment does not change no matter what the Bank of Canada does. The trade-off is that fixed rates are usually priced a bit higher than the starting variable rate, because the lender is charging you for that certainty. Fixed rates track government bond yields rather than the overnight rate, so they can shift between the day you get a quote and closing if you have not secured a rate hold.
A variable-rate mortgage is priced as "prime minus" or "prime plus" a set margin. Because prime tracks the Bank of Canada's overnight rate (2.25% in 2026, giving a prime of about 4.45%), your rate moves whenever the Bank changes policy. Some variable mortgages keep your payment steady and simply change how much goes to interest versus principal; others adjust the payment itself. Read your commitment carefully so you know which type you have.
| Feature | Fixed | Variable |
|---|---|---|
| Payment stability | Locked for term | Can change |
| Follows Bank of Canada | No (during term) | Yes |
| Typical break penalty | IRD or 3 months' interest (higher) | ~3 months' interest |
| Best when rates are | Expected to rise | Expected to fall |
With the overnight rate at 2.25% and the next decision on July 15, 2026, the choice depends on your risk tolerance and budget. If a rate increase would strain your household, a fixed rate protects you. If you have room in your budget and believe rates are more likely to fall than rise, a variable mortgage can save money and usually carries a lower penalty if you break early. Run both scenarios through our mortgage calculators before deciding. Remember every mortgage in Canada must also pass the stress test — the higher of your contract rate plus 2% or 5.25%.
Neither is universally better. A fixed rate gives payment certainty for the whole term; a variable rate follows the prime rate (about 4.45% in 2026) and can fall if the Bank of Canada cuts, but rise if it hikes. Choose fixed for stability, variable if you can tolerate movement and expect rates to fall.
Yes. Variable rates are priced as prime plus or minus a margin, and prime moves within days of every Bank of Canada rate decision.
Most lenders let you convert a variable mortgage to a fixed rate at any time without a penalty, but the fixed rate offered is whatever is current, which may be higher than your original.
Variable mortgages usually have a smaller penalty (about three months' interest), while fixed mortgages often use the interest rate differential, which can be much larger.