Fixed vs. Variable
Two Different Paths to the Same Goal: Which One's Right for You?
One of the most important — and frequently asked — mortgage decisions is whether to go with a fixed or variable rate. Each option comes with its own advantages, risks, and long-term implications. At Better Mortgages, we break it all down for you in plain language — backed by market data, real-world insight, and strategic guidance.
The Quick Definition
Fixed Rate:
Your mortgage rate and monthly payment stay exactly the same throughout your term (typically 5 years).
Variable Rate:
Your rate floats with changes to the Bank of Canada’s prime rate — and your payment or amortization may adjust as a result.
The Pros and Cons, Side by Side
Variable Rate Mortgages
More Savings, More Flexibility (If You Can Stomach the Swings)
Pros
- Historically outperforms fixed rates about 88% of the time (CIBC Study, 2001)
- Lower interest rates at the outset — spreads can range from 0.25% to over 1%
- Lower break penalties (typically just 3 months’ interest)
- Flexible for those planning to refinance or sell early
- Often ideal when interest rates are stable or declining
Cons
- If rates rise, your payments or amortization may increase
- Monthly budgeting can be more difficult
- Some variable products (like VRMs) carry trigger rate risks
- Requires comfort with uncertainty
Fixed Rate Mortgages
More Predictable, Less Surprising — Especially in Volatile Times
Pros
- Payments stay exactly the same — easy for budgeting
- You’re shielded from rate hikes during your term
- Portability options often more predictable when moving homes
- Great for first-time buyers or anyone seeking stability
Cons
- Higher penalties for breaking (can be thousands due to IRD)
- Historically more expensive over the long term
- If rates fall, you're stuck unless you refinance (with cost)
- Less flexibility if your life or finances change mid-term
The Numbers Don’t Lie: Historical Performance
Over the past few decades, variable-rate mortgages have saved Canadians thousands. In fact:
- According to the landmark study by York University’s Dr. Moshe Milevsky, Canadians would have saved money with a variable mortgage nearly 9 out of 10 times between 1950 and 2000.
- The CIBC study found that in 88% of cases, variable outperformed fixed, often saving borrowers significant interest.
- The exception? Periods of aggressive rate hikes — such as 1980–81, or most recently, 2022–2023, when fixed rates offered a short-term hedge against rapidly rising borrowing costs.
Bottom line? Variable usually wins, but timing and risk tolerance
are critical.
What’s More Popular Right Now?
The 5-year fixed remains the most commonly chosen term in Canada — especially during rate volatility. But:
- During 2020–2021, when rates were at rock bottom, many clients shifted to 5-year variable to maximize savings
- When rates started to climb, fixed-rate popularity surged again
- Today, we’re seeing a split — clients are now exploring shorter fixed terms, hybrids, or variable with conversion options
At Better Mortgages, we’re not here to push one option — we’re here to help you make the smartest choice for your life and risk profile.
What Type of Variable Rate Are We Talking About?
There are two types of variable-rate products — and the difference matters.
ARM (Adjustable-Rate Mortgage)
- Payments adjust every time the prime rate moves
- Keeps your amortization on track
- Easier to manage long-term interest savings
This is the type of product offered by our trusted lenders (and often preferred by savvy borrowers).
VRM (Variable-Rate Mortgage with Static Payments)
- Payments stay fixed, even if rates rise
- If rates increase too much, you hit the trigger rate — and may have to increase payments or make lump sum contributions
- May result in negative amortization if unchecked
Some borrowers love the stability of VRMs — but we make sure you understand the tradeoffs first.
| Who Should Consider Variable? | Who Should Consider Fixed? |
| Financially secure borrowers who can tolerate risk | First-time buyers with tight budgets |
| Those planning to sell, refinance, or break their mortgage in the next 3 years | Clients who need monthly predictability |
| Homeowners who want to maximize interest savings long-term | Anyone planning to stay put for the full term |
| Borrowers who believe rates have peaked or will decrease | Buyers who are risk-averse or debt-conscious |
Guiding Questions to Help You Decide
Can your budget handle a 3%–4% increase in rate if the prime rises?
Will rate volatility cause you stress or second-guessing?
Do you plan to refinance or move in the next 2–3 years?
Is the spread between fixed and variable small
(e.g., under 0.3%)?
Would you lose sleep over rising payments?
Your answers to these questions — combined with your long-term goals — will help us build the right mortgage strategy for you.
The Final Word: Strategy Over Guesswork
Choosing between fixed and variable isn’t about luck — it’s about fit.
At Better Mortgages, we:
- Compare the real cost difference between both options
- Assess your break penalty risk and life plans
- Model your payment scenarios based on likely rate trends
- Give you honest, data-backed advice without bias
Whether you want stability or flexibility, protection or performance — we’ll make sure your mortgage works as hard as you do.
We’ll guide you to the better choice for your mortgage
Let's Help You Choose Wisely
We’re ready to break it down — numbers, pros, cons, and all — so you can make your decision with confidence.
Talk to a Better Mortgages expert today to compare variable vs. fixed options personalized for your exact scenario.