Fixed or variable mortgage — April 2026
The most common money question in Canada right now: with the Bank of Canada's rate still elevated, should you lock a 5-year fixed or float a 5-year variable? Here's the math, both sides, and a framework for your call.
Option A
5-year fixed
Lock in today's rate for 5 years. Predictable payments. No rate risk.
Pros
- Budget certainty — you know exactly what you'll pay for 5 years
- Insulated if the BoC hikes again
- Stress test qualifies at lower rate than variable
Cons
- Typically higher rate than variable (50-100 bps premium for certainty)
- Breaking early = IRD penalty (can be $15k-30k on Big Bank posted-rate IRD)
- You miss the downside if rates fall
Option B
5-year variable
Rate moves with the Bank of Canada. Lower today, but you wear the risk.
Pros
- Lower starting rate than fixed (typically 50-100 bps)
- If the BoC cuts rates, you benefit immediately
- Break penalty is only 3 months' interest — much cheaper
Cons
- Payment goes up if the BoC hikes — and 2022-2023 taught us this can happen fast
- Harder to budget with a floating payment
- Stress test qualifies at a HIGHER rate (less borrowing power)
The math
On a $500,000 mortgage with a 25-year amortization, 5-year term, and approximately the current Canadian rate environment:
| Scenario | Rate | Monthly payment | 5-year interest |
|---|---|---|---|
| 5-yr fixed at 4.59% | 4.59% | $2,804 | $104,500 |
| 5-yr variable starting at 4.85% | 4.85% | $2,884 | $111,400 |
| Variable if the BoC cuts 0.75% total over 5 years | avg 4.40% | ~$2,745 | ~$98,000 |
These are illustrative rates; actual quotes depend on your lender, credit, and loan-to-value. Always use the Home Affordability tool for your real numbers.
Our take
For most Canadians in 2026, the honest answer is: pick based on your risk tolerance, not your forecast. Nobody — not economists, not banks, not MyMoneyMap — can reliably predict rate moves. What you CAN control is how well you can handle a worst-case scenario.
Pick fixed if:
- • You'd be financially stressed by a $300/month payment increase
- • You value sleep over potential savings
- • You're at the edge of your affordability (stress test was tight)
- • You plan to stay in this home for the full 5 years
Pick variable if:
- • You have a comfortable emergency fund (3-6 months expenses)
- • You could absorb a $500/month payment increase without strain
- • You might break the mortgage early (sell, refinance, port)
- • You believe the BoC is more likely to cut than hike over the next 5 years
This decision rotates monthly. Check back in May for the next one.
Run my own numbers