Guides / Fixed vs. Variable Mortgage Rates: How to Choose
Fixed vs. Variable Mortgage Rates: How to Choose
CompassNorth Editorial Team · Updated September 2026 · 6 min read
Every Canadian mortgage decision eventually comes down to this question: lock in a rate for certainty, or float with the market for a chance at paying less? Neither is objectively \”better\” — the right answer depends on your finances, your time horizon, and how you’d handle a payment that changes.
How each one works
Fixed-rate mortgages lock your interest rate for the full term (commonly 1–5 years). Your payment stays the same regardless of what happens to interest rates in the broader economy.
Variable-rate mortgages have a rate that moves with the lender’s prime rate, which tracks the Bank of Canada’s policy rate. Depending on the product, either your payment stays fixed while the portion going to principal vs. interest shifts (a \”static payment\” variable), or your payment itself moves up and down (an \”adjustable-rate\” mortgage).
The real trade-off
- Fixed gives you a payment you can budget around for years, with no exposure if rates rise — but you don’t benefit if rates fall, and breaking a fixed mortgage early can carry a much larger penalty (see our guide on how mortgage penalties work).
- Variable has, over long historical periods, often worked out cheaper on average — but \”on average\” isn’t a guarantee for your specific term, and your payment or amortization can be affected if rates rise. The penalty for breaking early is typically smaller (three months’ interest).
Questions worth asking yourself
- Could my budget absorb a meaningfully higher payment if rates rose, without financial stress?
- Do I value knowing my exact payment for the next several years, even if it costs a bit more on average?
- How likely am I to sell, refinance, or break this mortgage before the term ends?
- Am I comfortable following interest rate news, or would I rather not think about it?
There’s no wrong answer — lenders qualify you for both using the same federal stress test, so affordability on paper isn’t usually the deciding factor. Comfort with uncertainty is.
A middle ground: hybrid mortgages
Some lenders offer a hybrid (or \”combination\”) mortgage that splits your balance between a fixed and a variable portion, each with its own rate. It won’t eliminate the decision, but it can reduce how much any single rate movement affects your total payment.
Compare today's fixed and variable rates
See current illustrative rates by term and lender, side by side.
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