Fixed vs. Variable Rate

Compare fixed and variable mortgage rates in Canada, and learn how to choose based on your financial goals, risk tolerance, and market trends.

Fixed vs. Variable Rate



What is a Fixed vs. Variable Rate?

Fixed vs. variable rate refers to the difference between two types of mortgage interest structures: one with a constant rate and one that fluctuates with market changes.

Why Fixed vs. Variable Rates Matter in Real Estate

In Canadian real estate, choosing between a fixed or variable mortgage rate is one of the most important decisions for homebuyers. Each option offers distinct benefits and risks:

- Fixed rate mortgages have a locked-in interest rate for the term (e.g., 5 years), providing predictable payments and stability.
- Variable rate mortgages fluctuate with the lender’s prime rate, potentially offering lower initial rates but higher risk if rates rise.

Pros of Fixed Rate:
- Budget certainty
- Protection from interest rate hikes

Pros of Variable Rate:
- Historically lower average rates
- Potential savings if rates fall or stay low

The right choice depends on market outlook, financial comfort with risk, and how long the homeowner plans to stay in the property. Some borrowers opt for hybrid mortgages, combining both types.

Understanding this trade-off is key to managing long-term mortgage costs and financial stability.

Example of Fixed vs. Variable Rates in Action

A homeowner chooses a 5-year fixed rate at 5.2%, while their friend selects a variable rate at prime minus 1%, currently 4.8%. When rates rise, the variable rate eventually surpasses the fixed rate.

Key Takeaways

  • Fixed = stable, predictable payments.
  • Variable = fluctuates with market rates.
  • Variable may offer initial savings.
  • Fixed provides peace of mind in volatile markets.
  • Decision affects long-term mortgage costs.

Related Terms

Additional Terms

Back-End Ratio

The back-end ratio, or debt-to-income ratio, measures the percentage of a borrower’s gross monthly income spent on total monthly debt obligations,. more

Airspace Rights

Airspace rights are the legal rights to control, use, or sell the space above a parcel of land, separate from the ownership of the land itself.. more

Absorption Rate Analysis

Absorption rate analysis is the evaluation of how quickly available properties in a given market are being sold or leased during a specific time period.. more

Vacancy Rate

The vacancy rate is the percentage of all available rental units in a property or market that are unoccupied at a given time.. more

Sustainability

Sustainability in real estate refers to designing, constructing, and operating properties in ways that minimize environmental impact, support social. more

Soft Costs

Soft costs are the indirect expenses incurred in a construction project that are not directly tied to physical building materials or labour.. more

More For You

Will Toronto's Colour-Coded Landlord Ratings Also Shame Tenants?
Example of colour-coded RentSafeTO signs/joshmatlow.ca

At its last session, Toronto City Council unanimously approved a motion to introduce a colour-coded rating system for apartment buildings to be incorporated into RentSafeTO. The move is intended to further incentivize landlords to provide safe and clean housing to Toronto tenants and to keep tenants informed, though some say the initiative would shame both landlords and their renters.

The motion, which was put forward by Councillor Josh Matlow (Ward 12 Toronto—St. Paul's) and Mayor Olivia Chow, is based off the City's successful DineSafe program and would see apartment buildings across the city assessed for safety and cleanliness before being issued either a red, yellow, or green sign to display in their front window.

Keep ReadingShow less
Stunning Family Sanctuary Listed Near Richmond Hill's Lake Wilcox

Birdhouse Media

Tucked away on a serene cul-de-sac in Richmond Hill’s Limerick Point enclave, 29 Limerick Street is a rare and refined example of modern residential design — the kind of property that turns heads (and slows scrolls).

Purchased from the builder in 2023, this stunning abode backs onto a protected ravine and is only minutes to Lake Wilcox, offering not only peace and privacy, but an immersive connection to nature, all without compromising even a fraction of luxury.

Keep ReadingShow less
What's Open And Closed In Toronto On The August Civic Holiday
Shutterstock

Monday marks the August 4 Civic Holiday, and for the luckier among us, that means a long weekend. It also means that access to certain services and businesses may out of the norm. In particular, all banks, government services, and libraries will be closed.

That being said, most shopping centres, grocery stores, and pharmacies will remain open, and most major attractions will be open to the public as well, so there will be plenty of options for weekend entertainment. In any case, it's always a good idea to check with individual stores and attractions for their hours.

Keep ReadingShow less
IN THE KNOW: What's Open And Closed In Toronto On Holiday Monday
Sophisticated Corner Lot Snapped Up In Swansea Blends Luxury With Livability

Tucked into a tree-lined pocket of Toronto’s Swansea neighbourhood, 44A Morningside Avenue brings a crisp, contemporary presence to a quiet corner lot.

Spanning nearly 2,800 sq. ft of total living space, this custom home — recently snapped up from the market — is designed with both luxury and functionality in mind.

Keep ReadingShow less
Ontario Real Estate And Development Industry Hires And Promotions: July 2025

Clockwise from top left: Joseph Feldman, Alyssala Framboise, Hugh Clark, Kathy Kadziela, Khan Tran, Leanne Dufault

As anyone who subscribes to our weekly newsletter will know, STOREYS loves to plug the hires, promotions, and even retirements related to real estate and development in Ontario — and monthly, we also put out a rundown of everyone we highlighted in July.

Notable moves from last month include Joseph Feldman, who has been named President of Camrost Felcorp, and former TAS executives Hugh Clark and Khan Tran, who have joined the City of Toronto and Capital Developments, respectively, in executive roles.

Keep ReadingShow less
​Clockwise from top centre: Jaclyn Murphy, Century Group, Kieran McConnell, Krystal Kaju, Barrett Sprowson, Anthem Properties.

Clockwise from top centre: Jaclyn Murphy, Century Group, Kieran McConnell, Krystal Kaju, Barrett Sprowson, Anthem Properties. / LinkedIn

Although several notable real estate companies in Metro Vancouver have had to make the difficult decision to let staff go in recent months, citing the extensive and ongoing downturn of the market, many others are still carrying on and July had no shortage of hires and promotions.

Big developers such as Anthem Properties and Century Group each made several hires or promotions, as did companies like Creative Energy and Warrington PCI.

Keep ReadingShow less
A rendering of the Georgetown master-planned community in Surrey.

A rendering of the Georgetown master-planned community in Surrey. / Arcadis, Anthem Properties

Vancouver-based real estate developer Anthem Properties has submitted a rezoning application for the next phases of its sprawling Georgetown master-planned community in Surrey.

Georgetown is set for 14.4 acres on the eastern side of King George Boulevard and northern side of 102 Avenue, just one block east from the Expo Line SkyTrain's Surrey Central Station. The master-planned community was originally 10 acres before Anthem acquired 4.4 acres on the eastern side of Whalley Boulevard in 2018.

Keep ReadingShow less
A six-storey affordable housing project at 13583 81 Avenue in Surrey completed by BC Housing in 2024.

A six-storey affordable housing project at 13583 81 Avenue in Surrey completed by BC Housing in 2024. / BC Housing

This week, Surrey City Council endorsed a new initiative that would eliminate the rezoning requirement for non-market affordable housing projects, in an effort to accelerate the development of this much-needed kind of housing.

Under existing policy, in Surrey and also many other municipalities, most development projects have to first go through a rezoning process that often adds a significant amount of time to the development process — even if the proposal aligns with what the City has envisioned for the site.

Keep ReadingShow less