🏠Fixed vs Variable Mortgage Rate in Canada: Which Makes Sense Right Now?

17 hours ago

12 min read

Updated: 3 hours ago

Every mortgage decision begins in a quiet moment. Maybe it's a kitchen table covered in pre-approval paperwork. Maybe it's the renewal letter that arrived on a Tuesday and has been sitting under the fruit bowl ever since.

Picture a couple, call them Meera and Josh. They're a composite of the people we hear from, not real clients. They've found a semi in Mississauga with a crooked maple out front and a basement that floods a little in spring. They love it, and then the broker asks the question that stops the conversation: fixed or variable?

If you've been there, you know the feeling. It's a bet on the next five years of the economy, placed by someone who mostly wanted to talk about paint colours.

So let's make the fixed vs variable mortgage rate in Canada question less of a coin flip. Below you'll find where rates sit today, why fixed and variable move differently, what each really costs you in dollars, and how the answer changes for a first home, a renewal or a refinance.

Where Canada's Mortgage Market Stands Today (October 1, 2026)

The Bank of Canada held its overnight rate at 2.25% on September 2, a seventh straight decision at the level it's sat at since the October 2025 cut. That keeps most big bank prime rates at 4.45%, and prime is what variable mortgages are priced from.

The bank also changed its tone. It said upside risks to inflation have increased, while new tariffs make growth prospects more uncertain. Headline inflation has been hovering around 3%, largely because of gasoline prices, though core inflation remains closer to 2%. That's a very different mood from a year ago, when everyone was waiting for the next cut.

Here's the snapshot:

What	Where it stands
Bank of Canada overnight rate	2.25% (held Sept 2)
Prime rate (big banks)	4.45%
Lowest 5-yr variable (broker/online lenders)	roughly 3.25%–3.45%, depending on the source and whether it's insured
Lowest 5-yr fixed (broker/online lenders)	roughly 4.1%–4.35%, depending on the source and timing
Next Bank of Canada decisions	October 28 (with the Monetary Policy Report), then December 9

For the lowest rates, Ratehub lists the best high-ratio 5-year fixed at 4.34% and the best 5-year variable at 3.4% as of October 1. Another comparison site shows an insured 5-year variable as low as 3.25%. These numbers differ by a few hundredths because aggregators update at different times and treat insured and uninsured rates differently. Treat them as a range, not a promise.

One more detail: Canada's economy has bounced back. Second-quarter GDP grew 3.3% annualised, which fits oddly with the technical-recession worries we wrote about in Canada's Technical Recession 2026: What It Means for Families Right Now. The rebound is one reason the central bank isn't rushing to cut.

Fixed vs Variable Mortgage Rate in Canada: How Each One Actually Works

The fixed-rate mortgage: a promise in writing

A fixed rate is the lender saying, "For the next one to ten years, this is your rate, no matter what happens." Your payment and your interest rate stay put for the term, and the only surprise is renewal day. Most Canadians choose it. Ratehub's own figure is that 69% of Canadians pick a fixed-rate mortgage.

Fixed rates don't follow the central bank's headline rate. They follow bond markets, which is why they can rise even while the Bank of Canada does nothing.

The variable-rate mortgage: floating on prime

A variable rate is quoted as prime plus or minus a discount, such as "prime minus 1.00%." If prime moves, your rate moves with it. When the central bank cuts, you win. When it hikes, you pay.

Here's a nuance that trips up many Ontario borrowers. Variable mortgages come in two flavours:

Fixed-payment variable: your payment stays the same, but the split between interest and principal shifts. If rates rise, more of each payment goes to interest and less pays down the loan.
Adjustable-rate: your payment changes every time prime changes.

With the first type, your trigger rate matters. If rates climb high enough that your payment no longer covers the interest, the lender will ask you to increase your payments or make a lump-sum payment. Ask which type you're getting before you sign, because it changes how a rate hike feels.

What's Driving Fixed Rates vs Variable Rates?

Think of it as two different weather systems.

Variable rates answer to one thing: the Bank of Canada. Variable rates are tied to lenders' prime rates, which typically move in response to changes in the Bank of Canada's policy rate. The central bank is weighing tariffs, energy prices and a rebounding economy. Until it moves, your variable rate sits still.

Fixed rates answer to the bond market. Fixed mortgage rates generally move with government bond yields. Five things push those yields around:

Inflation expectations. When inflation runs above the 2% target, bond yields rise, and fixed rates follow.
Global conflict and oil. Earlier this year, the war in Iran drove up the government bond yields lenders use to price fixed-rate offers.
Trade policy. New tariffs and counter-tariffs make growth harder to predict, and uncertainty keeps long-term borrowing costs elevated.
Lender funding costs and appetite. Banks add their own spread on top of bond yields depending on how much mortgage business they want.
Competition and your profile. Credit score, down payment and insured vs uninsured status all change the rate you're offered.

That's why variable rates have been calm all year while fixed rates have wobbled. Fixed rates continue to face pressure from elevated bond yields, while prime hasn't budged.

What do the forecasters think?

They don't agree, which is the honest answer. Some expect little change: one forecast expects mortgage rates to stay stable for the rest of 2026 rather than decline. Another round-up described a base case where the overnight rate holds through 2026 and into 2027, with 5-year fixed rates drifting only modestly higher, and noted that the spread of bank forecasts is unusually wide. If the experts can't agree, nobody can promise you a winner.

Pros and Cons: Fixed vs Variable Mortgage Rates

	Fixed Rate	Variable Rate
Biggest pro	Predictable payments for the whole term	Currently the cheaper starting rate
Rate today (best market)	~4.1%–4.35%	~3.25%–3.45%
If rates rise	You're protected until renewal	Your cost rises, or less of your payment hits principal
If rates fall	You miss the savings	You benefit right away
Breaking early	Typically the greater of 3 months' interest or an interest-rate differential (IRD)	Typically 3 months' interest, usually much cheaper
Best for	Tight budgets, first-timers, anyone who values sleep	Borrowers with cash cushions, rising income or likely to sell or refinance early
Biggest con	Higher starting rate and potentially expensive penalties	Payment uncertainty, a harder emotional ride

The penalty row is the one people skip. If you might sell, move for work, or refinance within a few years, a variable mortgage's cheaper exit can be worth more than a small rate edge on a fixed one.

The Real-Dollar Math: A $600,000 Mortgage

Percentages are abstract, so here are monthly payments on a $600,000 mortgage, 25-year amortization. These are our own approximate calculations using Canadian compounding, and they're illustrations, not quotes:

Scenario	Rate	Monthly payment
Best-market variable	3.45%	$2,990
Best-market fixed	4.34%	$3,270
A big bank's advertised 5-yr fixed	4.99%	$3,490
Variable after prime rises 1 percentage point	4.45%	$3,320

Two things stand out. The cheapest variable rate saves about $500 a month against a big bank's advertised fixed rate, which is $6,000 a year. And even if prime rose a full point, that variable mortgage would still cost about the same as the best-market fixed.

The catch is that the variable borrower carries the risk. If prime jumped by two points, the advantage would vanish. The fixed borrower pays a premium for certainty, and for some households that premium is cheap insurance.

Big 5 Banks vs Credit Union vs the Open Market: Today's Rates Side by Side

Here's the snapshot, using Ratehub's bank table from September 30 and NerdWallet's October 1 figures for Meridian. Big bank rates are advertised "special" rates, and your own offer depends on your credit, down payment, insured vs uninsured status and how hard you negotiate.

Lender	5-yr variable	5-yr fixed	3-yr fixed
Best market rate (broker/online)	3.40%	4.34%	4.19%
Scotiabank	3.65% (prime − 0.80%)	4.59%	4.39%
RBC	3.65% (prime − 0.80%)	4.74%	4.79%
CIBC	3.95% (prime − 0.50%)	4.79%	4.94%
TD	3.99% (prime − 0.46%)	4.99%	5.09%
BMO	4.12% (prime − 0.33%)	4.99%	4.69%
Meridian Credit Union (Ontario)	3.44%	4.59%	4.44%

The Big 5 numbers are from Ratehub's September 30 bank table, and Meridian's from NerdWallet's October 1 update.

A few things jump out:

The big banks aren't the cheapest. Ratehub notes the lowest rates aren't always offered by the biggest banks, and that brokers can often beat them. Brokers can shop banks, credit unions and monoline lenders at once.
Scotiabank and RBC lead the Big 5 on variable. Scotiabank leads on fixed. The gap between the best and worst Big 5 fixed rate here is 0.40 percentage points. On a $600,000 mortgage, that's roughly $140 a month.
Meridian is competitive. At 3.44% variable, it's nearly matching the best market rate, and it's an Ontario-only lender.
Posted rates are a trap. RBC's posted 5-year fixed has been near 6%, far above its special rate. Never judge a bank by its headline "posted" number.

The big bank welcome offers (cashback)

Banks also compete on cashback, but each offer comes with conditions:

TD: up to $5,100 cashback on a new mortgage. It includes an extra $1,100 for switching to TD, requires TD pre-authorized payments, and the application must be funded by December 29, 2026.
CIBC: up to $4,500 cash back for first-time buyers, new purchases or mortgages transferred from another lender. You must apply between July 30 and November 1, 2026, fund within 120 days, and make payments from a CIBC chequing account. It isn't available through a mortgage broker, and a $100,000 to $299,999 mortgage earns $1,000.
Scotiabank: the Mortgage+ program advertises up to $7,700 in first-year value, mostly through banking bundles. Its Cash Bonus Bundle runs through October 29, 2026. Scene+ points are also available on the Rewards Mortgage.
RBC: a Cash Back Mortgage offering up to 7%, to a maximum of $20,000, on eligible fixed closed mortgages.
BMO: was listing $1,100 to $4,100 cashback with a date of September 4. That may have expired or rolled over, so ask.

The catch is the clawback. Scotiabank's terms say its cashback is treated as repayable if the mortgage is assumed, paid out, transferred or renewed before the term ends. Cashback mortgages often come with higher rates, so run the numbers. A $4,000 bonus disappears fast against a rate that's 0.25 percentage points higher on a large balance.

Which One Makes Sense? It Depends on Who You Are

If you're buying your first home

You have more help than any generation before you. Since December 2024, 30-year amortizations are available on insured mortgages for all first-time buyers, and the insured mortgage cap is $1.5 million. You still have to pass the stress test, which means qualifying at the higher of your contract rate plus 2% or 5.25%.

On $600,000 at 4.59%, stretching from 25 to 30 years drops the payment from about $3,350 to $3,060. It also adds roughly $95,000 in interest over the life of the loan (our calculation). It's a useful tool if you need breathing room, and you can pay it down faster later using prepayments.

Which rate type fits a first-timer? Honestly, it depends on your cushion:

Fixed if the payment is already a stretch, or you're a single-income household. Budgeting certainty matters more than saving a few hundred a month.
Variable if you have a real emergency fund, stable income and some room in the budget. We'd also want a plan to put the monthly savings toward principal rather than quietly spending them.

Use the FHSA for the down payment. One guide lists the FHSA at $40,000 and the Home Buyers' Plan at $60,000. Check Ontario Budget 2026: What It Really Means for Your Wallet for housing rebates, and build the down payment in a high-interest savings account while you wait.

If you're renewing your mortgage

Renewal is where the current rate environment really lands. Many mortgages signed in 2021 and 2022 at 1.5% to 2.5% are coming due into rates around 4% to 5%.

A quick illustration, not a quote: a $500,000 balance with 20 years left, renewed from about 2% to 4.59%, moves from roughly $2,525 to $3,175 a month, an increase of about $650.

Here's what to do:

Start 120 to 180 days early. Lenders will often hold a rate for that long, and you'll have time to shop.
Don't just sign your bank's renewal letter. Ratehub points out that a bank's loyalty offer isn't always the lowest available.
Know that switching lenders at renewal is easier now. A straight switch generally doesn't require re-passing the stress test, so you can leave without a fresh qualification hurdle.
Consider a shorter term. The 2-year and 3-year fixed options are sitting below 4% at some lenders, a bit lower than the 5-year. Short terms give you a chance to reset if rates ease.
Plan the budget shock early. Our guides on saving money every month and what to do with your money right now help you find the extra $400 to $700 before the payment changes.

If you're refinancing your home

A refinance means breaking your current mortgage to borrow against your equity: to consolidate debt, renovate or buy out a partner. A few honest warnings:

Penalties. You'll pay either three months' interest or the interest-rate differential on a fixed mortgage. Always get the exact number in writing before deciding.
Rules. Refinances use uninsured rates and still need to pass the stress test, and you generally can't borrow beyond 80% of your home's value.
Variable often suits a refinance. If you may sell, pay down debt quickly or refinance again soon, a variable rate's lower break cost is a feature.
Don't refinance just to chase a rate. The savings must beat the penalty, legal fees and appraisal. Run a proper calculator first.

For a deeper look at home equity as a wealth tool, read The Canadian Wealth Ladder.

Banks vs Credit Unions: Mortgage Rates and Borrowing Power

In Ontario, Meridian is the largest credit union, followed by names like Desjardins Ontario and Alterna Savings. They differ from the big banks in some meaningful ways:

	Big banks	Ontario credit unions
Rates	Often higher advertised special rates, with negotiable discounts	Often competitive, especially variable
Qualifying	Federally regulated, so they follow the federal stress test	Provincially regulated, and often more flexible (some qualify borrowers at the contract rate). Ask directly
Flexible files	More rigid with self-employed or rental income	Often friendlier to self-employed and rental-income borrowers
Reach	Branches nationwide	Local, e.g., Meridian is Ontario-only
Perks	Big cashback and bundle offers	Smaller promotions, more personal service
Moving provinces	Easy, you keep your lender	Can be harder, since some are provincial

If you're self-employed or have non-traditional income, a credit union or broker is worth a call before you give up. For a deeper comparison of fees, rates and how to switch, read our guide, Credit Union vs Traditional Bank. Don't forget the basics when you're comparing offers either: prepayment privileges, portability and penalties matter as much as the rate.

So, Fixed or Variable? Our Honest Take for 2026

We won't tell you what to pick, because we don't know your finances. Here is how we'd frame it.

Lean fixed if:

A $300 a month payment increase would cause real stress.
You're a first-time buyer with thin savings.
You want to know your costs five years out and not think about it.

Lean variable if:

You can absorb a payment jump and have a solid emergency fund.
You may sell, move or refinance within three years.
You'd invest the savings, not spend them. If you want to learn how, our Personal Finance 101 checklist is a good place to start.

Consider a split: some lenders let you divide the mortgage into fixed and variable portions, which softens both risks.

Whatever you pick, the winners usually do the same things. They start early, get several quotes, negotiate, read the penalty clause and keep cash in reserve. Our salary calculator can help you check what payment your income actually supports.

FAQ: Fixed vs Variable Mortgage Rate

Is a fixed or variable mortgage better in Canada right now?

Variable rates are currently lower, roughly 3.25% to 3.45% against about 4.1% to 4.35% for the best fixed. Fixed gives certainty, and variable gives savings plus risk. The better choice depends on your cushion and how long you'll keep the mortgage.

Will mortgage rates go down in 2026?

Unlikely in any big way. The Bank of Canada has held at 2.25% and flagged higher inflation risks, and forecasters broadly expect stability. The next decisions are October 28 and December 9.

What is the stress test for mortgages in Canada?

You must qualify at the higher of your contract rate plus 2% or 5.25%. Switching lenders at a straight renewal generally avoids it.

Can first-time buyers get a 30-year mortgage?

Yes, on insured mortgages. All first-time buyers (and buyers of new builds) are eligible, and the insured cap is $1.5 million.

Is a credit union mortgage better than a bank mortgage?

Not always, but credit unions can be competitive and flexible, especially for self-employed borrowers. Compare them against banks and brokers.

Does cashback make a mortgage cheaper?

Only if the rate isn't higher and you won't break the mortgage early. Most cashback must be repaid if you leave before the term ends.

Chasing Dreams' remark

Back in that Mississauga kitchen, Meera and Josh don't need a crystal ball. They need a plan: an honest look at their cushion, a quote or two, and a clear understanding of what a bad outcome would cost. That's what the fixed vs variable mortgage rate decision really is. It's less a forecast than a choice about how much uncertainty you can carry.

Rates may shift again on October 28. Bookmark this page.

Disclaimer: this article is for educational purposes and is not financial, legal or mortgage advice. Rates and promotions change often and were gathered from public sources on October 1, 2026. Confirm all details with your lender or a licensed Ontario mortgage broker.