Fixed vs Variable Rate Comparator

🔒 Fixed Rate Mortgages

• Rate locked for entire term
• Predictable payments
• Protection from rate increases
• Typically higher starting rate
• Higher penalties to break

📊 Variable Rate Mortgages

• Rate tied to prime rate
• Payment or interest share can change
• Lower starting rate typically
• Can benefit from rate drops
• Lower penalties to break

🎯 Making Your Decision

• Consider your risk tolerance
• Budget flexibility matters
• Rate environment outlook
• How long you plan to stay
• Stress-test worst case

What's the difference between fixed and variable mortgage rates in Canada?

Fixed rates are locked in for your entire mortgage term (typically 1-5 years) and won't change regardless of market conditions. Variable rates fluctuate with the prime rate and are typically quoted as 'Prime ± spread' (e.g., Prime - 0.95%). Variable rates often start lower but can increase or decrease during your term.

How does prime rate affect my variable mortgage?

Variable mortgage rates are based on the prime rate set by each bank, which typically follows the Bank of Canada's policy rate. With the policy rate at 2.25%, the big banks' prime rate is 4.45% (as of October 8, 2026). If you have a variable rate of Prime - 0.95%, your rate is 3.50%; if prime rises by 0.25%, it becomes 3.75%. With an adjustable payment, your payment goes up; with a fixed-payment variable mortgage, more of each payment goes to interest instead.

Which is better: fixed or variable rate in 2026?

It depends on your situation and rate outlook. Variable rates move with prime, so they can fall or rise during your term, and the penalty to break is usually only 3 months' interest. Fixed rates give you certainty for the whole term but usually cost more to break. Compare today's actual rates for both, and consider your risk tolerance, budget flexibility, and how long you expect to keep the mortgage.

What happens if prime rate increases significantly?

With an adjustable-rate mortgage, your payment increases when prime rises. With a variable-rate mortgage that has fixed payments, more of each payment goes to interest, and if rates rise far enough you can hit your trigger rate, where your payment no longer covers the interest. Use this calculator to stress-test scenarios - if prime increases 2%, you'll see how much the payment on an adjustable-rate mortgage rises. If that is more than you can handle, a fixed rate provides payment certainty.

Can I switch from variable to fixed during my term?

Many variable-rate mortgages include a convertibility feature that lets you switch to a fixed rate during your term without a penalty, at the lender's current fixed rate (not your original rate). You typically cannot switch from fixed to variable without breaking your mortgage and paying a penalty. Check your mortgage contract for specific conversion options.

What is the breakeven point for fixed vs variable?

The breakeven point shows how much prime can increase before variable costs exceed fixed. This calculator computes this automatically. For example, if breakeven is +1.25%, variable saves money as long as prime doesn't rise more than 1.25% during your term. Beyond that, fixed would have been cheaper.