Fixed vs. variable: how to actually decide

“Should I go fixed or variable?” is the question I get most. The honest answer isn't a number — it's that the right choice depends on you, not on a universal winner. Here's how to actually decide.

What each one really is

Fixed.Your interest rate and your payment are locked for the whole term. Total predictability — you know exactly what you'll pay every month, no matter what happens in the wider economy.

Variable.Your rate moves with your lender's prime rate, which follows the Bank of Canada. When the Bank cuts, you tend to win; when it hikes, your cost (or your payment) goes up. More upside, more uncertainty.

Where the market sits right now

As of mid-2026, the Bank of Canada has held its policy rate steady at 2.25% after a long run of cuts, keeping prime around 4.45%. For the first time in years, well-priced variable rates are sitting below comparable fixed rates— a real shift from 2022–2023, when locking in was the obvious move. That's made variable attractive again for buyers who can stomach some movement.

The real question isn't “which is cheaper today”

It's this: if your payment went up, would it ruin your month — or just annoy you?

A slightly lower rate isn't worth it if you'll lie awake every Bank of Canada announcement.

If your budget is tight and certainty helps you sleep, fixed earns its small premium. If you've got cushion, a longer time horizon, and you won't panic-switch the first time rates wobble, variable can pay off. Neither answer is “smarter” — they're matched to different lives.

The part people forget: the penalty to break

Most mortgages get broken before the term ends — people move, refinance, or life changes. How much that costs depends heavily on your rate type:

• Variablepenalties are usually about three months' interest — predictable and often modest.
• Fixedpenalties at the big banks can be calculated as an “interest rate differential,” which can run into many thousands of dollars depending on timing.

If there's any chance you'll move or refinance mid-term, this matters as much as the headline rate.

A middle path

Many variable mortgages are convertible— you can lock into a fixed rate later without breaking your mortgage. That lets you start variable to capture today's lower rate, with an escape hatch if the outlook changes. It's not always the right call, but it's an option worth knowing about.

How I'd help you choose

When we talk, I look at three things: your monthly budget and how much cushion you actually have, how long you plan to keep this property, and your honest tolerance for surprises. Then I show you the real numbers both ways. The goal isn't to win a bet on rates — it's to pick the option you'll still feel good about in two years.