Fixed vs variable mortgage rates: what would it take for variable to lose?
Variable costs less than fixed unless prime rises far enough. With today's lowest collected 20%+ down 5-year rates (4.59% fixed, 3.89% variable) on $500,000, variable costs more over five years only if prime averages 0.66% points higher than today for the whole term.
Today's numbers
On Nov 2, 2026 the lowest uninsured 5-year fixed we collected was 4.59% and the lowest 5-year variable 3.89%. Fixed would cost $107,180 of interest over five years on $500,000 (25-year amortization).
Three paths for prime
| Path for prime | Variable interest | vs fixed |
|---|---|---|
| Hold all term | $91,208 | −$15,971 |
| Two more hikes (next two decisions) | $102,802 | −$4,378 |
| Four hikes | $113,801 | +$6,622 |
| Three cuts | $74,232 | −$32,947 |
It takes 3 quarter-point hikes at the next scheduled decisions for variable to cost more than fixed. Moves early in the term matter more than late ones because the balance is larger.
Beyond the interest
- Penalties: variable usually costs three months' interest to break; fixed can cost an IRD that is much larger.
- Payment shocks: adjustable-payment variables change with every move; fixed-payment variables can hit a trigger point.
- Stress test: both qualify at the greater of the rate + 2 points or 5.25%.
How to choose
Run your own numbers in the fixed vs variable calculator, which uses the Bank of Canada's real announcement dates, and check the decision tracker. The Bank raised rates in October 2026 and said more could be needed.
| Fixed | 4.59%lowest 20%+ down 5-yr fixed collected |
|---|---|
| Variable | 3.89%lowest 20%+ down 5-yr variable collected |
| Mortgage | $500,000, 25 years, 5-year term |
| Fixed interest over 5 years | $107,180 |
| Variable interest if prime holds | $91,208 |
| Quarter-point hikes before variable loses | 3on the Bank of Canada's announcement dates |
| Break-even prime move | +0.66 pointspermanent, from today |
Open this example in the calculator →Computed Nov 2, 2026.
How has variable done against fixed in the past?
Lenders usually price variable below fixed because the borrower, not the lender, carries the risk of rates rising. That bet goes wrong when the Bank of Canada raises rates soon after you sign: between March 2022 and July 2023 the policy rate went from 0.25% to 5.00% (Bank of Canada), and adjustable-payment variable borrowers saw their payments jump. The Bank's October 2026 increase is a reminder that the path isn't one-way.
Who is variable usually right for?
- Borrowers with room in their budget to absorb higher payments, or a fixed-payment variable and the discipline to raise payments if needed.
- People who may sell or refinance before the term ends, because a variable penalty is usually three months' interest.
- Not for someone already stretched at the stress-test rate: a few hikes could push payments past what's comfortable.
What this means for you
- If you choose variable: work out your payment at prime + 1 point today, and keep that cushion in your budget.
- If you choose fixed: you're paying for certainty; make sure the penalty terms suit you if your plans change.
- Either way: compare like with like on the rate board and check the next decision date.
Frequently asked questions
Is variable cheaper than fixed right now?
At today's lowest collected rates, variable starts 0.70% points lower. Whether it ends up cheaper depends on what prime does over the term.
Can I switch from variable to fixed?
Many variable mortgages let you convert to a fixed term at the lender's rate that day. The rules are in your contract, so check before you rely on it.
Primary sources
- Bank of Canada — Press release: policy rate raised to 2.5% (October 28, 2026) (effective October 28, 2026). Checked .
- Bank of Canada — 2026 schedule for policy interest rate announcements. Checked .
- OSFI — Minimum qualifying rate for uninsured mortgages (effective January 29, 2026). Checked .
- Financial Consumer Agency of Canada — Reduce prepayment penalties. Checked .
- Financial Consumer Agency of Canada — When interest rates rise. Checked .