Fixed Rate vs. Variable Interest Rate

YOU CAN SOMETIMES EXPECT A FINANCIAL REWARD FOR GOING WITH THE VARIABLE RATE, ALTHOUGH THE PRECISE MAGNITUDE WILL EBB AND FLOW DEPENDING ON THE ECONOMIC ENVIRONMENT.

Choosing between a fixed-rate mortgage and a variable-rate mortgage is one of the most important decisions Canadian homebuyers make. Understanding how each option works — especially in today’s rate environment — can help you feel confident in your choice.

Current Canadian Prime Rate: 4.45%

What Is a Fixed-Rate Mortgage?

A fixed-rate mortgage means your interest rate stays the same for the entire term (for example, a 3-year or 5-year term).

Benefits of a Fixed Mortgage

• Your mortgage payment stays the same

• Protection from interest rate increases

• Easier monthly budgeting

• Peace of mind and stability

Fixed-rate mortgages are ideal for:

• First-time home buyers

• Families managing tight monthly budgets

• Homeowners who prefer financial predictability

• Anyone who feels uncomfortable with rate fluctuations

If you value stability and want to lock in your mortgage rate, a fixed mortgage may be the right choice.

What Is a Variable-Rate Mortgage?

A variable-rate mortgage is tied to your lender’s prime rate, which is currently 4.45% in Canada.

Your rate is calculated as:

Prime ± a lender discount or premium

For example:
If you have Prime – 0.50%, your current variable rate would be:

4.45% – 0.50% = 3.95%

How Variable Mortgages Work

• When the prime rate changes, your interest rate changes

• Depending on your mortgage type, your payment may change — or the amount going toward principal vs. interest may adjust

• You can benefit when rates decrease

Benefits of a Variable Mortgage

• Historically lower average rates over time

• Potential interest savings

• Often lower penalties if you break your mortgage early

Variable mortgages are best suited for:

• Borrowers comfortable with some market fluctuation

• Homeowners with flexible cash flow

• Buyers planning to sell or refinance within a few years

Fixed vs Variable Mortgage: Which Is Better?

There is no one-size-fits-all answer. The right mortgage depends on:

• Your financial goals

• Your risk tolerance

• Your income stability

• Your long-term plans

• Current interest rate trends

With today’s prime rate at 4.45%, both fixed and variable options can make sense — depending on your situation.

Speak With a Mortgage Professional

Before choosing between a fixed or variable mortgage in Canada, it’s important to understand the risks, rewards, and long-term impact of each option.

A personalized mortgage strategy ensures you’re not just choosing a rate — you’re choosing the right solution for your financial future.

If you’d like expert advice tailored to your situation, let’s connect and review your options.