Variable vs. Fixed Mortgage: Which One Actually Makes Sense in 2026?

This is probably the question I'm asked more than any other right now.

"Should I go fixed or variable?"

The funny thing is, most people think the answer comes down to whichever rate is lower.

It doesn't.

Choosing between fixed and variable is really about your comfort level, your plans over the next few years, and how much uncertainty you're willing to live with. The "best" mortgage isn't always the one with the lowest rate. It's the one that fits your life.

Right now, variable rates have become cheaper than fixed rates again. That hasn't been the case for a while, so naturally people are asking if it's time to make the switch.

The answer? Maybe.

Here's what you need to know.

Fixed Rates

A fixed-rate mortgage is exactly what it sounds like.

Your interest rate stays the same for the entire term, which means your payment stays the same too.

If you like knowing exactly what is coming out of your account every month, fixed can be a great option.

There's comfort in certainty.

One thing many people don't realize is that fixed mortgage rates aren't directly set by the Bank of Canada. They're largely driven by Government of Canada bond yields. So even if the Bank of Canada doesn't change its overnight rate, fixed mortgage pricing can still move.

Variable Rates

Variable mortgages work differently.

They're tied to your lender's prime rate, which moves when the Bank of Canada changes its overnight lending rate.

Today, prime sits around 4.45%, and many lenders are offering discounts from prime, making variable rates noticeably lower than comparable fixed rates.

There are actually two types of variable mortgages:

• Fixed-payment variable: Your payment stays the same, but the amount going toward interest and principal changes as rates move.

• Adjustable-payment variable: Both your interest rate and your payment change whenever prime changes.

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That distinction is important because each behaves very differently if rates rise.

What Does That Mean in Dollars?

Let's use a simple example.

On a $500,000 mortgage with a 25-year amortization:

• Around 4.04% fixed, your payment is roughly $2,646/month.

• Around 3.35% variable, your payment starts around $2,461/month.

That's almost $185 every month in savings today.

But remember—that assumes rates stay where they are. If the Bank of Canada raises rates later this year, those savings could shrink.

That's why looking only at today's rate can be misleading.

Who Is Fixed Best For?

In my experience, fixed tends to make sense for people who:

• Like predictable monthly payments.

• Are buying their first home and stretching their budget.

• Would lose sleep worrying about future rate increases.

• Have irregular income and value consistency.

Sometimes peace of mind is worth paying a little more for.

Who Is Variable Best For?

Variable can be a great fit if you:

• Have stable income.

• Have emergency savings.

• Can comfortably handle payment increases if rates rise.

• Think there's a chance you'll sell, refinance, or break your mortgage before the term ends.

One of the biggest advantages of variable mortgages is the penalty.

Most variable mortgages have a penalty of just three months' interest if you break them early.

Some fixed mortgages, on the other hand, can come with penalties in the tens of thousands depending on the lender and how interest rates have changed.

That surprises people every week.

A Strategy I Really Like

One option I often discuss with clients is choosing a variable mortgage—but making payments as though they had selected the fixed rate.

For example, if the variable payment is $2,460 but the fixed payment would have been $2,645, you simply continue paying the higher amount.

The extra money goes directly toward paying down your mortgage faster.

If rates eventually rise, you've already built yourself a cushion and can simply reduce the extra payment if needed.

It isn't the right strategy for everyone, but for disciplined borrowers with stable income, it can work really well.

The Biggest Mistakes I See

After doing mortgages for years, I see the same mistakes over and over.

People choose based on today's rate instead of thinking about the next five years.

They underestimate mortgage penalties.

They choose variable without having any financial cushion.

Or they simply accept whatever their bank offers without comparing other lenders.

Those decisions can cost thousands of dollars.

So... Which One Should You Choose?

There's no universal answer.

I've had clients with very high incomes choose fixed because they value certainty.

I've had first-time buyers choose variable because they understood the risks and had a solid financial plan.

Neither choice is automatically right or wrong.

The right mortgage is the one that matches your goals—not your neighbour's, not your parents', and not whatever headline happens to be circulating this week.

That's why I run both scenarios for every client.

Instead of asking, "Which rate is better?"

I ask,

"Which mortgage will put you in the strongest financial position over the next five years?"

That's a much better conversation.