Fixed vs variable mortgages: How are Canadians choosing as economic uncertainty soars?

Canadian borrowers are reassessing their mortgage choices as fixed rates climb on the back of recent bond market turbulence, prompting a fresh look at the trade-offs between fixed and variable options.

Fixed mortgage rates have been pushed higher as bond yields rise, with markets scaling back expectations for future rate cuts in both Canada and the United States. According to Ratehub, the lowest insured five-year fixed mortgage rate has risen to around 3.94%, up from 3.79% in February.

Leah Zlatkin, a licensed mortgage broker and LowestRates.ca expert, says the shifting rate environment is prompting some borrowers to reconsider where they stand.

“Most borrowers still prefer the certainty of fixed payments, especially after the sharp increases to variable rates during the Bank of Canada’s rate-hiking cycle in 2022 and 2023,” Zlatkin said. “At the same time, others are looking at the numbers and believe a variable mortgage is worth the risk given the immediate savings.”

Breaking penalties shape borrower decisions

Variable mortgages are currently available at meaningful discounts compared with many fixed options, with some borrowers securing rates close to prime minus 0.95. That pricing gap is drawing renewed interest in variable options, particularly among homeowners who plan to sell within a few years or who expect interest rates to hold steady or decline.

“In many cases, it comes down to a cost-benefit analysis,” Zlatkin said. “Some borrowers expect to sell their home within a few years, and the penalty to break a variable mortgage is typically only three months’ interest. Others believe the savings from today’s variable discount make it worth the risk compared with locking into a higher fixed rate.”

Fixed mortgages remain far more popular, with 77% of rate inquiries on at least one major comparison platform in 2025 directed toward fixed products, compared with just 8% for variable, as many borrowers continue to prioritise payment certainty, according to Ratehub.

Fixed mortgage rates are expected to rise slightly amid continued bond market volatility, driven by high government debt and various international conflicts, while variable mortgage rates are expected to remain relatively stable at least through mid-2026, according to Mortgage Sandbox.

Despite the appeal of variable discounts, Zlatkin cautioned that such products are not suitable for every borrower.

“The reality is that variable rates come with uncertainty,” she said. “Borrowers need to be comfortable with the possibility that rates could move higher again depending on how the economic environment evolves.”

CMP

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