Fixed vs. Variable mortgage rates
Fixed vs. variable mortgages aren’t about picking a “winner” , they’re about choosing the structure that fits how you live and budget.
Fixed rates are driven by bond markets and offer predictability. Variable rates move with Prime and can offer flexibility, but not all variable mortgages work the same way. Understanding how your payment reacts when rates change can save you stress (and money) down the road.
Fixed rate
Stays the same for your whole term (e.g., 3 or 5 years).
Based on Government of Canada bond yields (mainly the 5-year).
Bond traders look ahead and try to guess at inflation and future BoC moves, so fixed
rates can change even when the BoC hasn’t.
Good for: predictable payments and budgeting.
Variable rate
Moves up or down when your lender’s Prime rate changes.
Prime usually changes after the Bank of Canada announces its rate decision (about
every 6 weeks).
Quoted as Prime ± a discount/premium (varies by lender).
Example: If Prime is 4.95% and your deal is Prime – 0.50%, your rate = 4.45%.
Good for: taking advantage of falling rates (but payments/costs can rise if rates go up).
Quick note:
Different banks offer different Prime discounts, so two “variable” offers can have
different actual rates.
Some variable products change your payment when Prime changes; others keep the
payment the same and adjust how much goes to interest (until they hit a “trigger rate”).
If you’d like, tell me your term preference (3 vs 5 years) and risk comfort, and I’ll translate this
into which option/structure likely fits you best right now.
