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Fixed vs. Variable Rate Mortgage in Canada: Which is Best for 2024?

Learn how fixed and variable mortgage rates in Canada work, see current 2024 rates and make the right choice for your situation.

Choosing between a fixed vs. variable rate mortgage is one of Canadians’ most significant financial decisions when buying a home or renewing an existing mortgage. With mortgage rates rising in 2024, understanding the key differences between these two common mortgage rates is critical.

This extensive guide will compare fixed vs. variable rate mortgage in Canada for 2024. We’ll cover how the two types of mortgage rates work, current market conditions, and strategies to manage the risks and maximize the rewards of each mortgage structure.

Whether you prioritize low costs, predictable payments, flexibility, or risk management, this guide will outline the pros and cons to determine which option may be best for your financial situation. Let’s dive in!

An overview of Fixed and Variable Rate Mortgage

First, let’s take a look to understand how fixed and variable rate mortgages work.

Fixed-Rate Mortgage

With a fixed-rate mortgage, the interest rate is set for the entire term and cannot fluctuate. The term is typically 6 months to 10 years, with 5 years being the most common.

This means your monthly mortgage payment will remain the same over the set term, providing stability and predictability for budgeting purposes. You know exactly how much each payment goes toward interest vs principal over the term.

Variable-Rate Mortgage

A variable-rate mortgage means the interest rate fluctuates based on the prime rate, which major Canadian banks set based on the Bank of Canada overnight rate.

Variable mortgage rates are quoted in relation to the prime rate, for example, “prime minus 0.5%.” Even as the prime rate changes, the discount or premium set at the beginning remains constant.

With variable-rate mortgages, the interest portion of your monthly payment changes as rates fluctuate. The total monthly payment may remain the same, go up, or go down.

Current Rates for Fixed and Variable Mortgage in Canada 2024

As of June 2024, the average five-year fixed rate was 5.04% and five-year variable rates are around 1% higher than comparable fixed rate offers.


Based on the latest inflation data and economic projections, the Bank of Canada has lowered its key interest rate to 4.75 per cent, marking the bank’s first rate cut since March 2020. This would bring variable mortgage rates notably closer to fixed-rate levels.


Fixed vs. Variable Mortgage Popularity in Canada

Historically, fixed-rate mortgages have been more popular in Canada. The stability and payment consistency provide peace of mind for many homeowners.

However, when variable rates dropped to record lows in 2021, they surged in popularity, the majority (53%) of Canadians shifted their preferences in
interest rate terms, opting for variable interest rates in the second half of 2021 [Source].

As the Bank of Canada began aggressively hiking rates in 2022, fixed rates regained dominance. By the end of 2022, 69% of mortgage holders had fixed-rate terms [Source].

The latest CMHC survey shows that the percentage of consumers who opted for a fixed rate increased from 66% in 2023 to 69% in 2024, and 23% of mortgages contracted are variable rates [Source].

Based on current trends, fixed rates are once again the clear preferred option, though variables still hold appeal for certain borrowers.

Key Differences Between Fixed vs. Variable Rate

Differences Between Fixed vs. Variable-Rate Mortgage
Differences Between Fixed vs. Variable-Rate Mortgage

There are several key differences between fixed vs. variable-rate mortgages that you need to understand when deciding between the two options:

Interest Rate

  • The interest rate on a fixed mortgage is based on Government of Canada bond yields. It is generally higher than variable mortgage rates for the same term to compensate lenders for the reduced risk and guarantee the rate for extended periods.
  • Variable mortgage rates tend to be lower than fixed rates in a stable environment. However, as this type of rate fluctuate based on changes to the prime rate, they carry the risk of rising interest costs if the prime rate trends significantly upwards.

Monthly Payments

  • With a fixed-rate mortgage, your monthly mortgage payment stays the same over the term, allowing reliable budgeting.
  • For variable-rate mortgages, your payment amount can increase or decrease as interest rates change and require budget adjustments.

Impact on Amortization

  • With a fixed-rate mortgage, the portion of your payment going toward principal versus interest stays consistent throughout the term. This allows reliable projections for when the mortgage will be paid off.
  • When variable rate rise, more of your payment goes toward interest and less to principal. This slows the paydown of the mortgage balance. The unpredictability of variable rate impacts makes determining your payoff date more difficult.

Those who value a precise payoff schedule may prefer the consistency of fixed-rate mortgages. Borrowers focused on minimizing costs, in the long run, may accept the variability of timelines with a variable rate.

Penalties for Breaking Contract

  • Fixed-rate mortgages charge high penalties, often equivalent to several months’ interest. With fixed-rate mortgages, you cannot take advantage of lower rates without expensive penalties.
  • Most variable rate mortgages only charge a penalty of 3 months’ interest if you break your term [Source]

Ability to be assumed and ported

Most fixed-rate mortgages are assumable and portable. However, variable-rate mortgages don’t qualify as assumable/ portable mortgages. This means if you sell your home to buy a new one or transfer it to the new buyers, you cannot take over the existing mortgage at its current terms.

Risk Profile

  • Fixed-rate mortgages carry lower risk but may cost more over the long run.
  • Variable rate mortgages carry higher risk but may save substantially on interest costs long-term.

Understanding these key differences will let you determine which mortgage structure best suits your financial situation and preferences.

Pros and Cons of Fixed vs. Variable Mortgage

Pros and Cons of Fixed vs. Variable-rate Mortgage
Pros and Cons of Fixed vs. Variable-rate Mortgage

Pros and Cons of Fixed-Rate Mortgage

Here are some of the top benefits of fixed-rate mortgages in Canada

Payment stability– Monthly payments remain the same for the entire mortgage term.
– Allows reliable budgeting and financial planning.
Protection from rising interest rates– Sheltered from rate hikes that would increase costs with a variable mortgage.
– Peace of mind knowing payments cannot go up.
Easier to qualify– Fixed payments make it easier to pass affordability calculations for lenders.
– Allows qualifying for larger loan amounts.
Predictable payoff schedule– Know exactly when the mortgage will be paid off if all payments are made.
– Can calculate how much goes to interest vs principal each month.
Benefits of fixed-rate mortgages

While fixed mortgages provide stability, they do come with some drawbacks to consider as well

Higher interest costs over the long term– Historical data shows fixed rates cost more in total interest over time.
– Must refinance or renew to get lower rates if they drop.
Miss out if rates drop– No ability to take advantage of the rates decline without breaking contract.
High penalties for prepayment– Early payout penalties equivalent to months of interest if breaking contract.
– Makes it very expensive to refinance or move before maturity.
Inflexibility– Cannot renegotiate lower rates or payments when market rates drop.
– Must wait for renewal period to adjust terms
Drawbacks of fixed-rate mortgages

Pros and Cons of Variable-Rate Mortgage

Variable-rate mortgages also offer unique advantages, particularly for borrowers comfortable taking on some risk for potential rewards.

Lower interest costs over long term– Historical data shows lower total interest paid over extended periods.
– Take advantage of prime rate drops without needing to renegotiate.
Take Advantage of Falling Rates– Interest rate and payments automatically go down when prime rate drops.
– No action needed to take advantage of lower rates.
Flexibility to lock in fixed rate– Can convert to a fixed-rate mortgage at any time without penalty.
– Useful if variable rates become very low.
Lower penalties for breaking contract– Typically only need to pay back 3 months of interest if breaking contract.
– Makes it easier to refinance or move compared to a fixed penalty.
Benefits of variable-rate mortgages

On the flip side, variable-rate mortgages also come with a unique set of risks and considerations.

Unpredictable monthly payments– Payment amounts fluctuate based on changes in prime rate.
– Makes reliable budgeting and planning difficult.
Risk of higher costs if rates rise– Interest and payments rise if prime rate trends upward.
– Reduces overall mortgage affordability.
More challenging to qualify– Variable payment volatility means lower maximum approval amounts.
– Lenders stress test qualification at much higher rates.
Uncertainty and stress– Psychological burden of unpredictable rate and payment fluctuations.
– Creates anxiety for borrowers who highly value stability.
Potential for longer amortization– More interest and less principal if rates rise significantly.
– Increases timeframe to pay off mortgage.
Drawbacks of variable-rate mortgages

Determining Which Mortgage Structure is Right For You

Which Mortgage Structure is Right For You?
Which Mortgage Structure is Right For You?

With the pros and cons of fixed vs. variable-rate mortgage spelled out, you’re ready to determine which option may be the best fit for your unique situation.

Here are some examples of situations where a fixed or variable mortgage may be preferable:

Fixed-rate mortgages tend to be better for

  • First-time homebuyers who value payment stability while they establish themselves.
  • Borrowers on tight budgets with little wiggle room if payments increased.
  • People with anxiety about interest rates and payment unpredictability.
  • Someone who plans to move in the next 2-3 years before renewal.
  • An investor seeking steady and predictable mortgage payments.

Variable-rate mortgages tend to be better for

  • Borrowers who watch rates closely and are ready to act on opportunities.
  • Those with flexible budgets that can handle potential payment increases.
  • Homeowners who plan to stay long-term past renewal periods.
  • Investors with multiple properties looking to minimize overall interest costs.
  • Anyone looking to refinance or move if rates decline meaningfully.
  • Those comfortable with some risk in exchange for potential savings.

In many cases, a hybrid approach may be appropriate, such as splitting between fixed and variable rate products. This balances the desire for stability while still capitalizing on variable rate advantages.

Managing Risks of Variable Mortgages

Variable-rate mortgages have inherent risks of rising costs and unpredictable payments as the prime rate changes. However, borrowers can use strategies to mitigate these risks.

  • Make Lump Sum Prepayments When Rates Are Low

Making lump sum prepayments when variable rates are low allows you to pay down more principal and offset potential payment increases if rates go up later.

  • Choose a Product With Flexible Prepayment Options

Opting for variable products that allow unlimited prepayments gives you the most flexibility to pay more when affordable.

  • Monitor Rates and Lock Into Fixed When Low

To protect your savings, pay attention to rate trends and lock into a fixed-rate term if variable rates drop to favourable lows.

  • Consider Shorter-Term Fixed Rates Initially

One strategy is to start with a 1-3 year fixed term to provide short-term stability while retaining flexibility.

Tips to Get the Best Mortgage Rate

  • Whether you choose fixed vs. variable-rate mortgages, make sure you get the best possible rate for your situation by shopping around:
  • Compare mortgage rates from multiple lenders and brokers. Rates and discounts can vary significantly.
  • Negotiate with lenders for better rate discounts and terms. Don’t be shy to ask for a better deal.
  • Work with a mortgage broker who can access wholesale bank rates unavailable to the public.
  • Time your mortgage shopping when rates are lower, typically in the spring and summer.

Getting the lowest rate will maximize your savings and make your mortgage more affordable over the long run, regardless of whether you choose fixed or variable.

Key Takeaways: Fixed vs. Variable Rate Mortgage in Canada

FactorFixed Rate MortgageVariable Rate Mortgage
Interest rateRemains the same for the term
Usually higher than variable
Fluctuates based on prime rate
Usually lower than fixed
Monthly paymentsDo not changeCan go up or down
QualificationOften easierCan be harder
FlexibilityAssumable and PortableCannot be Assumed and Ported
BudgetingMore predictableRequires adjustments
Prepayment penaltiesHigh penaltiesLower penalties
Interest rate changesCannot benefit from dropsCan benefit from declines
CertaintyHigh certaintyUnpredictability
Key differences between Fixed vs. Variable-Rate Mortgage to Consider
  • Fixed-rate mortgages offer payment stability and certainty. Variable-rate mortgages provide flexibility and potential interest savings over the long run but carry risks of unpredictable costs.
  • As of 2024, fixed-rate mortgages are more popular again after a variable rate surge in 2021-2022 when the prime reached record lows.
  • Current data indicates prime rate cuts may come in mid to late 2024. This could bring variable mortgage rates closer to fixed-rate offers.
  • To manage risks, variable mortgage holders can make prepayments when rates are low and lock into fixed terms when variable rates drop.
  • Assess your unique risk preferences and financial situation. Splitting between mortgage types can provide a balanced approach.


Deciding between a fixed vs. variable-rate mortgage is an important decision that requires considering your unique financial situation and risk tolerance.
While fixed rates provide stability, variable rates offer flexibility and potential savings. There is no one-size-fits-all answer.
The best way to determine which structure suits your needs is to speak with a mortgage professional. At Best Mortgage Online, our expert mortgage advisors take the time to understand your complete financial picture, goals, and concerns. Based on a complete analysis, we guide you to the ideal mortgage structure. Contact us now to start the process and ensure you make the right mortgage decision.


How to decide between a fixed or variable-rate mortgage?

Assess your risk tolerance and need for payment stability. Calculate your budget at potentially higher variable rates. Consider splitting between fixed and variable products. Consult an expert mortgage advisor.

What is the difference between fixed and variable-rate mortgages?

Fixed mortgage rates stay the same for the term, while variable rates fluctuate with the prime rate. Fixed offers certainty but costs more long-term. Variable carries risk but can save substantially.

Should I choose a variable-rate mortgage in 2024?

Variable-rate mortgages offer savings potential in 2024 as the Bank of Canada is forecasted to cut rates. However, variable rates come with payment uncertainty. Assess your situ

Penalties for breaking a fixed vs variable mortgage?

Variable mortgages typically only have a 3 month interest penalty, making it easier to break the term. Fixed mortgages charge higher penalties.

Can you convert a variable to a fixed-rate mortgage?

Yes, variable rate mortgage holders can lock into a fixed rate at any time without penalty. This provides helpful flexibility.

How can I manage the risks of a variable-rate mortgage?

Make lump sum payments when rates are low, choose flexible prepayment options, monitor rates, and lock into fixed terms strategically to offset variable rate risk.

Who should choose a fixed vs. variable-rate mortgage?

Fixed rates work for those wanting payment certainty, and variable rates work for those comfortable with some risk and who want to maximize potential savings from rate declines.

How do I find the best mortgage rate in Canada?

Compare rates from multiple lenders and brokers. Negotiate for the best discounts and terms. Consider using an experienced mortgage broker to access exclusive rates.

Article Sources

At Best Mortgage Online, the statistics we cite come from trusted governmental and industry organizations to guarantee accuracy.

  1. Variable vs Fixed Mortgage Rates –
  2. Variable vs Fixed Mortgage: The Ultimate Guide for 2024 –
  3. Fixed vs. Adjustable-Rate Mortgage: What’s the Difference? –
  4. What’s the difference between fixed and variable rate mortgages?-
  5. Fixed and variable rate mortgages –

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