Fixed vs. Variable: Choosing a Rate Type in Canada
By Tiffany Quaye · Last reviewed 2026-08-01
The short answer
Fixed rates give payment certainty and can carry large IRD penalties if broken early. Variable rates move with prime, usually carry a simple three-months'-interest penalty, and historically have cost less over time — with more volatility. The right choice depends on your tolerance for change and how likely you are to break the term.
Questions that decide it
- Would a $200 payment increase disrupt your household? If yes, fixed buys peace of mind.
- Is there a real chance you'll sell, move or refinance mid-term? Variable's smaller penalty matters a lot.
- Are you consolidating debt and rebuilding stability? Predictability usually wins.
- Do you have savings to absorb rate movement? That's what makes variable comfortable.
The penalty asymmetry nobody mentions
The most expensive mortgage decisions I see aren't rate choices — they're penalties on fixed mortgages broken two years in. If your life is in flux, the flexibility of a variable, or a shorter fixed term, may be worth more than a small rate difference.
Questions people ask
Can I switch from variable to fixed mid-term?
Most variable mortgages allow conversion to a fixed term at the lender's current rates, without a penalty. The rate you convert into is the lender's offer, not necessarily the market's best.
Which is cheaper overall?
Historically variable has come out ahead more often than not, but not always, and not in every rate cycle. Choose based on your ability to absorb change, not on a forecast.
Want this applied to your actual numbers?
Articles are general. Your file isn't. Bring your balances and your renewal date and I'll tell you what I'd do in your position.
Related reading
Not sure which option fits your situation?
Bring your numbers — mortgage balance, balances you're carrying, and what's stressing you out. I'll walk you through what's realistic, including when doing nothing is the better call.