Fixed vs Variable in BC: Which Mortgage Fits Your Risk Profile?

Fixed vs Variable in BC

Nick Atwal, licensed mortgage broker, Coastal Blue Mortgages

Picture Maya and Daniel, facing the fixed vs variable mortgage question in BC. They've just had an offer accepted on an $800,000 townhouse in Port Coquitlam. With 20% down, they need a $640,000 mortgage, and they have two quotes, based on our posted rates on October 8, 2026: a 5-year fixed at 4.69% or a variable at 3.70%.

The variable is about $347 a month cheaper to start. Daniel wants the savings. Maya wants to know what happens if rates go up. They're an example, not real clients, but the question is real: is the saving worth the risk for your budget and your plans?

This guide answers it with real numbers: what variable saves, what it could cost, what each one costs to break, and which one fits the way you live.

What's The Difference Between a Fixed and a Variable Mortgage?

A fixed-rate mortgage keeps the same interest rate and payment for the whole term, usually one to five years. A variable-rate mortgage is priced as your lender's prime rate plus or minus a set amount (the "spread"), so your rate changes whenever prime changes. Prime usually moves when the Bank of Canada changes its policy rate.

Variable mortgages come in two styles, and the difference matters:

• Adjustable payment: your payment goes up or down with prime, so your principal paydown stays on track.
• Fixed payment: your payment stays the same, but when prime rises, more of it goes to interest. Rise far enough and you hit your trigger rate, where the payment only covers interest. The Financial Consumer Agency of Canada (FCAC) warns that past it, unpaid interest can be added to your balance.

Two features are worth asking about:

• Convertibility: many variable mortgages let you lock into a fixed rate mid-term. FCAC notes there may be a fee or conditions, and you get the lender's fixed rate on the day you convert, which may be higher than your variable rate.
• Hybrid (split) mortgages: part fixed, part variable. There's more on these below.

How Much Does a Variable Rate Save, and What Could It Cost?

Here's Maya and Daniel's mortgage under six things prime could do.

The inputs (for illustration): $640,000 mortgage, 25-year amortization, monthly payments. Fixed at 4.69% for 5 years. Variable at 3.70% (prime of 4.45% minus 0.75%) with an adjustable payment. These are our posted rates on October 8, 2026 (our latest posted rates are in the "What's true" box below). Both use Canadian semi-annual compounding. In each scenario, prime changes once, at the start of year two, then holds.

These figures are estimates for illustration, not a rate commitment. Rates can change daily, our lowest rates can be promotional or discretionary rates that not everyone qualifies for, and yours depend on your lender, down payment and file.

What the table tells you:

• Variable starts $347 a month cheaper ($3,263 vs $3,610).
• The break-even is about 1.25 points. If prime jumps that much at the start of year two and stays there, both cost about the same in interest over five years. If the rise comes on day one, the break-even is about 1 point; if it waits until year three, about 1.7 points. The later rates rise, the more of the early saving you keep.
• Each quarter-point move in prime changes this payment by about $86 a month.

Real rate paths are messier than one jump, so treat this as a map, not a forecast.

With a fixed-payment variable instead, their payment would stay at $3,263. Their trigger rate would start at about 6.2%, roughly 2.5 points above their starting rate, and rise slowly as the balance falls.

Want your own version of this table? Try the Fixed vs Variable Rate Comparator, or send me your numbers and I'll run both paths for you.

What Does It Cost to Break a Fixed vs a Variable Mortgage?

This is the part most people skip, and in BC it often decides the question.

FCAC explains that a prepayment penalty is usually the higher of three months' interest or the interest rate differential (IRD). The IRD is roughly the interest the lender loses by re-lending your money at a lower rate for the rest of your term, so lenders usually use it when your rate is higher than current rates. Many variable mortgages charge only three months' interest, but contracts differ. Read yours.

Example (simplified, for illustration): Maya and Daniel break their mortgage after two years, with three years left.

The IRD here is simplified: the rate gap (4.69% − 3.69%) × the balance × 3 years left. Real formulas differ by lender, and lenders that use posted rates in their formula can charge noticeably more. Before you decide anything, ask your lender for a written penalty estimate.

Why this matters in BC:

• Moving up is common. Many first homes here are condos or townhouses bought with a plan to move within a few years.
• Presale completion dates don't always line up with a 5-year term.
• Buying again means paying Property Transfer Tax again unless you qualify for an exemption. A big IRD on top of that adds up.
• Life happens: separations, job moves and refinances for a suite or renovation all break mortgages.

Porting (moving your mortgage to the new home) or blending your rate can soften a penalty, but both depend on the lender's rules and on re-qualifying. If there's a real chance you'll break within three years, weigh the penalty as heavily as the rate.

Fixed vs Variable at a Glance

Which One Fits Your Risk Profile?

Your risk profile isn't about whether you're "a gambler". It's about how much a payment change would hurt and how likely you are to break the mortgage early. Answer four questions honestly:

1. The payment-shock test. If prime rose 2 points at the start of year two, Maya and Daniel's variable payment would go from $3,263 to about $3,957, roughly $694 more a month. Could you absorb that without skipping savings or carrying a credit card balance? If not, lean fixed.
2. The moving test. Is there a real chance you'll sell, move, refinance or separate within three years? If yes, lean variable or a shorter fixed term.
3. The buffer test. Do you have at least three months of mortgage payments in savings? That buffer lets a variable borrower ride out a rate rise without panic.
4. The sleep test. If every Bank of Canada announcement would cost you sleep, the certainty of fixed has real value, even if it costs more.

One warning. Under the stress test you qualify at the higher of your contract rate plus 2% or 5.25%, so a lower variable rate can let you qualify for more. Don't pick variable because it stretches your approval. Pick it because it fits.

What About a 3-Year Fixed or a Hybrid?

If you're torn, the middle ground is real.

A 3-year fixed gives you certainty now and less time exposed to an IRD. In our example, a 3-year fixed at 4.54% (our posted rate on October 8, 2026) would cost about $3,556 a month: $54 less than the 5-year, and about $2,800 less in interest over the first three years. The trade-off is that you renew sooner, at whatever rates are then.

A hybrid splits the mortgage, for example half fixed and half variable, so it halves both the benefit and the risk. Ask how each part renews and whether you can move it to another lender later.

Your Next Step

Want both paths run with your real numbers? Apply, and I'll come back with fixed and variable options side by side: payments, a few rate scenarios, and what breaking would cost if your plans change.

Companion resource

Fixed or variable? A one-page decision worksheet

(Financial Consumer Agency of Canada, Choosing a mortgage that is right for you.) Supports: fixed vs variable definitions, adjustable vs fixed-payment variable, hybrid mortgages, convertibility.

(Financial Consumer Agency of Canada, Interest on mortgages.) Supports: trigger rate, negative amortization and what lenders may require; convertibility, its fee or conditions, and hybrid mortgages.

(Financial Consumer Agency of Canada, Mortgage fees: Prepayment penalties.) Supports: penalty is usually the higher of three months' interest or IRD; when the IRD applies; how it's calculated.

(Financial Consumer Agency of Canada, Breaking your mortgage contract.) Supports: costs of breaking, porting and blending options.

(Bank of Canada, Bank of Canada maintains the policy rate at 2¼% (September 2, 2026).) Supports: policy rate 2.25% and next decision date.

(Bank of Canada, 2026 schedule for policy interest rate announcements.) Supports: October 28 and December 9, 2026 decision dates.

(Bank of Canada, Posted interest rates offered by chartered banks.) Supports: big-bank posted 1-, 3- and 5-year rates, the latest weekly figures as of October 18, 2026.

(OSFI, Minimum qualifying rate for uninsured mortgages.) Supports: qualifying rate is the higher of contract rate + 2% or 5.25%.

(Interest Act, section 6.) Supports: blended-payment mortgages must state the rate calculated yearly or half-yearly, the basis for semi-annual compounding in our maths.

Coastal Blue Mortgages, our posted rates on October 8 and October 18, 2026, as shown on our mortgage rates page. Supports: the illustrative rates in the examples (October 8: 5-year fixed 4.69%, 3-year fixed 4.54%, variable 3.70%, prime 4.45%) and the posted rates in the "What's true" box (October 18: 5-year fixed 4.89%, 3-year fixed 4.69%, variable 3.70%). Not an official source; used only for "for illustration" rates and the box.

Payment, scenario, trigger-rate and penalty figures: computed with semi-annual compounding (monthly rate = (1 + r/2)^(1/6) − 1), the same method as our calculators, with the inputs stated in each example.