Understanding Mortgage Rates in Canada: Fixed vs. Variable

When buying a home in Canada, one of the most important decisions you’ll make is choosing between a fixed and variable mortgage rate. Both options have their advantages and risks, and understanding how they work can help you make the best financial decision for your situation.

What is a Fixed Mortgage Rate?

A fixed mortgage rate means your interest rate stays the same for the entire term of your mortgage, typically ranging from 1 to 10 years, with 5-year fixed rates being the most common.

Pros of Fixed Mortgage Rates:

✅ Predictable Payments – Your monthly payments remain the same, making budgeting easier.

✅ Protection from Rate Increases – You won’t be affected by fluctuations in interest rates.

✅ Ideal for Risk-Averse Buyers – If you prefer stability, this is a good option.

Cons of Fixed Mortgage Rates:

❌ Higher Initial Rates – Fixed rates are usually higher than variable rates at the start.

❌ Less Flexibility – If interest rates drop, you won’t benefit unless you refinance.

What is a Variable Mortgage Rate?

A variable mortgage rate fluctuates based on the Bank of Canada’s prime lending rate. Your monthly payment may stay the same, but the portion that goes toward principal versus interest will change as rates go up or down.

Pros of Variable Mortgage Rates:

✅ Lower Initial Rates – Historically, variable rates have been lower than fixed rates.

✅ Potential Interest Savings – If rates stay low or decrease, you’ll pay less interest over time.

✅ More Flexibility – Easier to switch or pay off your mortgage early in some cases.

Cons of Variable Mortgage Rates:

❌ Uncertain Payments – If interest rates rise, more of your payment goes to interest.

❌ Risk of Increased Costs – If rates spike, your mortgage payments could become unaffordable.

Which Mortgage Rate is Best for You?

The right choice depends on your financial situation and risk tolerance:

• Choose Fixed if you want stability and predictability in your payments.

• Choose Variable if you’re comfortable with some risk and want to potentially save on interest over time.

Experts often suggest that if rates are expected to stay low, a variable rate can be beneficial. However, if you’re buying in an uncertain market, a fixed rate might provide peace of mind.

Final Thoughts

Deciding between a fixed and variable mortgage rate is a crucial step in your home-buying journey. Consulting with a mortgage broker or financial advisor can help you determine the best option based on current market trends and your financial goals.

If you’re planning to buy a home in the GTA including Mississauga homes, Burlington homes, Oakville homes, Toronto homes, Milton homes, Cambridge homes, Hamilton homes, we can connect you with trusted mortgage professionals to guide you through the process. Feel free to reach out for personalized advice!