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.

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.