Fixed vs. Variable: How to Actually Choose

A fixed-rate mortgage locks your interest rate for the full term, so your payment never changes no matter what happens to the Bank of Canada's policy rate. A variable-rate mortgage moves with prime, which means your payment (or the portion going to interest) can rise or fall during your term.

Historically, variable rates have cost less than fixed rates more often than not over a full amortization. But 'historically cheaper on average' is not the same as 'cheaper for you, this term.' The right question is not which product is statistically better — it's whether a payment increase of a few hundred dollars a month would meaningfully strain your budget.

If you have little slack in your monthly budget, a fixed rate buys certainty even if it costs a bit more. If you have a financial cushion and a longer time horizon, a variable rate lets you benefit when rates fall, with the option to lock in later.

Also worth checking: variable-rate mortgages usually have lower penalties to break early (typically three months' interest) compared to fixed-rate mortgages, which can use the more expensive interest rate differential (IRD) calculation. If you expect to move, refinance, or renew early, that difference matters.