Fixed vs. Variable Mortgage in Canada (2026): Which Should You Choose?

It's the oldest question in mortgages: fixed or variable? In 2026 it's trickier than usual, because the usual "rates are about to fall, go variable" logic doesn't hold. The Bank of Canada is holding steady and inflation pressures are pushing back up. Here's how to choose based on your situation rather than a guess about the future.

The short answer

Choose a fixed rate if you value certainty and would lose sleep over a rising payment; choose variable if you can absorb fluctuations and want to bet on rates falling. In 2026 the case for variable is weaker than usual — the Bank of Canada is holding its policy rate at 2.25% (prime is 4.45%) and markets are pricing in possible increases later in the year, not cuts. For most borrowers right now, fixed offers better peace of mind. See today's rates.

How each one works

Fixed-rate mortgage

Your rate and payment are locked for the term (usually 1–5 years). You're protected from rate increases, and budgeting is effortless. The trade-off: if rates fall, you don't benefit, and breaking a fixed mortgage early can carry a steep penalty (the "interest rate differential").

Variable-rate mortgage

Your rate moves with your lender's prime rate, which tracks the Bank of Canada. When the Bank cuts, you win; when it hikes, your rate (and often your payment) rises. Variable historically wins over long periods, but only if you can stomach the swings — and the break penalty is usually much smaller (commonly three months' interest).

The questions that actually decide it

• Could you handle a higher payment? If a rate jump would strain your budget, fixed is the safer call. Test it with our stress-test calculator.
• Might you break the mortgage early? If you may sell or refinance mid-term, variable's smaller penalty matters a lot.
• What's your read on rates? Variable is a bet that rates fall. In 2026 that bet is far from safe.
• How do you sleep? If rate headlines would stress you, the certainty of fixed has real value beyond the math.

The 2026 context

Normally a slowing economy means rate cuts ahead, which favours variable. But 2026's mild, trade-driven slowdown is colliding with rising energy-driven inflation, and the Bank has signalled a preference for holding. With cuts uncertain and hikes possible, the "go variable and ride rates down" thesis is shaky. That tilts the average borrower toward fixed — or toward a shorter fixed term that lets you reassess sooner. For the full picture, see is Canada in a recession in 2026.

A middle path: the short-term fixed

If you don't want to commit to five years but don't want variable's risk, a 1- to 3-year fixed locks your payment while letting you renew sooner if the outlook improves. Many borrowers are choosing exactly this in 2026. You can revisit at renewal.

Frequently asked questions

Is fixed or variable better in 2026?

For most borrowers, fixed — because the usual case for variable (expecting rate cuts) is weak in 2026, with the Bank of Canada holding at 2.25% and markets pricing in possible increases. Variable still suits those who can absorb swings.

Will the Bank of Canada cut rates in 2026?

It's not guaranteed. The Bank held at 2.25% and rising energy-driven inflation has markets anticipating possible hikes later in the year, so don't choose variable assuming cuts are coming.

Which has a smaller penalty if I break early?

Variable, usually — typically about three months' interest, versus a fixed mortgage's interest-rate-differential penalty, which can be much larger. If you might break the term, that's a point for variable.

Can I switch from variable to fixed later?

Most lenders let you lock a variable into a fixed rate mid-term without a penalty, though you'll take whatever fixed rate is offered at that time. It's a useful escape hatch if rates start rising.

Not sure which fits you? Talk to us or compare current rates — we'll model fixed vs. variable against your actual budget and plans.