Fixed vs. Variable: Which Mortgage Makes Sense Right Now?

It’s one of the questions we’re getting most often right now:

“Geri, should I go fixed or variable?”

And I wish there were a one-word answer.

The reality is that the best mortgage isn’t necessarily the one with the lowest rate today. It’s the one that makes sense for your budget, your plans and how much uncertainty you’re comfortable with.

With the Bank of Canada currently holding its policy rate at 2.25%, while fixed mortgage rates have been facing upward pressure, it’s a good time to understand what actually drives the two types of mortgage rates, and why they don’t always move together.

Why Aren’t Fixed Rates Following the Bank of Canada?

This is probably one of the biggest misconceptions we hear.

When the Bank of Canada announces a rate decision, it has a more direct impact on variable-rate mortgages and lines of credit, which are tied to lenders’ prime rates.

Fixed mortgage rates work differently.

They are heavily influenced by the bond market, particularly Government of Canada bond yields. When bond yields rise, there is generally upward pressure on fixed mortgage rates. When yields fall, there may be room for fixed mortgage rates to come down.

That means we can have a situation where the Bank of Canada does absolutely nothing—and fixed mortgage rates still move.

And that is exactly why we don't recommend trying to perfectly “time” the mortgage market.

So…Fixed or Variable?

There are advantages to both.

A Fixed Mortgage May Make Sense If…

You really value knowing exactly what your mortgage payment will be.

Your rate is locked in for the term, which makes budgeting easier and protects you from rate increases during that period.

For someone who would lose sleep wondering what the Bank of Canada might do next, that predictability can have real value.

But there’s another piece we always consider: penalties.

Depending on the lender and mortgage, breaking a fixed-rate mortgage before the end of the term can potentially result in a larger prepayment penalty. If there’s a chance you’ll sell, refinance or make another change before your term ends, we want to consider that too.

A Variable Mortgage May Make Sense If…

You’re comfortable with some uncertainty and have enough room in your budget to absorb potential rate changes.

If rates decline, you may benefit. If rates rise, however, your borrowing costs can increase.

Variable mortgages can also offer more flexibility when it comes to breaking the mortgage, since the penalty is commonly based on three months' interest—but the exact terms depend on the lender and product.

Don't Choose Your Mortgage Based on a Rate Prediction

This is the part I think is especially important.

Nobody knows with certainty where rates will be six months, one year or three years from now.

Rather than trying to predict the Bank of Canada or the bond market, we look at questions like:

How long do you expect to own this home?

Could you be moving before the mortgage term ends?

How much room is there in your monthly budget?

Would a changing payment make you uncomfortable?

How important is flexibility?

What would it cost to break the mortgage if your plans changed?

Those answers can be much more important than a small difference in today's rate.

What About Waiting for Rates to Drop?

This comes up frequently too.

If you're buying a home, I wouldn't build your entire purchasing strategy around waiting for a specific mortgage rate.

Rates could fall—but they could also stay where they are or move higher. Home prices, inventory and your own circumstances can change in the meantime.

The better question is:

Can I comfortably afford the home and mortgage based on today's numbers?

If the answer is yes, we can build the mortgage strategy from there.

And if rates improve before your mortgage closes? That's where having someone actively watching your file matters.

This Is Where Mortgage Strategy Matters

At Geri Janes & Associates, our job isn't simply to find you a rate and send you on your way.

We look at the whole mortgage.

Rate. Term. Penalties. Prepayment privileges. Flexibility. Your future plans. And how all of those pieces work together.

Because the mortgage with the lowest rate isn't always the mortgage that costs you the least.

Whether you're buying, refinancing or coming up for renewal, we'll walk you through the fixed and variable options available to you, show you the numbers and help you understand the trade-offs.

Then you can make the decision that feels right for you.

That's what good mortgage advice should look like.