Mortgages
Fixed vs Variable Mortgages in Canada
How fixed and variable rates work, how variable payments react when prime changes, and how to decide which suits you.
What is the difference?
A fixed rate doesn’t change during your term. A variable rate can go up or down during the term as your lender’s prime rate changes.
Variable rates are set as prime plus or minus a margin. Prime follows the Bank of Canada’s policy rate, which rose 0.25 points to 2.5% on October 28, 2026. Lenders usually adjust prime within a day.
Put it into practiceMortgage payment calculatorWhat happens to my payment when rates change?
It depends on the type of variable mortgage. With adjustable payments, the payment changes with the rate. With fixed payments, the payment stays the same but more of it goes to interest.
Example: a $500,000 mortgage over 25 years at 4.7% (prime today) costs $2,823.23 a month. If rates rise by 1 percentage point, an adjustable payment becomes $3,110.42, about $287 more a month.
With fixed payments, if rates rise far enough to reach the trigger point in your contract, your lender may raise your payment.
Are there other options?
Hybrid or combination mortgages split the mortgage into a fixed part and a variable part, so you’re partly protected if rates rise and partly benefit if they fall.
Because each part can have its own term, hybrids can be harder to move to another lender.
How do I choose?
Choose fixed if you want a payment that won’t change and would struggle if it rose. Choose variable if you can absorb higher payments and want to benefit if rates fall.
Compare the penalty for breaking the mortgage too: fixed-rate penalties can be much larger, because they can be based on the interest rate differential. Always ask for a discount from the posted rate; lenders advertise posted rates but often offer less.
Keep reading
MortgagesHow Mortgages Work in CanadaWhat a mortgage is, the difference between term and amortization, how payments are calculated and what else you pay when you buy.
MortgagesMortgage Prepayment Penalties in CanadaWhen you pay a penalty for breaking your mortgage, how lenders calculate it, and how to keep it low.- MortgagesThe Mortgage Stress Test in CanadaWhat the stress test is, how the qualifying rate is set, how it affects how much you can borrow, and when it doesn’t apply.
MortgagesHow to Renew Your Mortgage in CanadaWhen your lender has to contact you, why you shouldn’t just sign the renewal letter, and what switching lenders involves.
Official sources and further reading
Terms vary by product. Confirm the provider’s current terms before acting. This guide does not predict approval, realized value or credit-score changes. How WalletReturn calculates value