Fixed vs variable mortgage in 2026

A fixed mortgage sets the rate for the term. The payment calculated from that rate does not change because the Bank of Canada met. A variable mortgage sets a discount, or occasionally a premium, against prime. When prime changes, the contract rate changes by the same amount. Two products hide inside that sentence. On an adjustable-rate mortgage the payment is recalculated. On a variable-rate mortgage with a fixed payment, the payment stays put and the split between interest and principal changes. The second kind can hit a trigger rate, where the interest alone is larger than the payment. The commitment uses one of those two designs. The word variable on a rate sheet does not tell you which.

The Bank of Canada held its target for the overnight rate at 2.25% on September 2, 2026. The Bank Rate is 2.50% and the deposit rate is 2.20%. The next scheduled announcement is October 28, 2026. Big-bank prime on this site is 4.45%, which is the policy rate plus 2.20%. TD publishes its own mortgage prime, so a variable discount off "prime" is only meaningful once you know which prime the contract uses. Through the decisions published on the Bank of Canada's policy-rate page, the target has been 2.25% at every announcement from October 29, 2025 through September 2, 2026. Prime on this site has sat at 4.45% across that hold. A variable borrower in 2026 has not been collecting monthly surprises from the overnight rate. The fixed borrower has been living with a different market. Bond yields move the price of a new fixed term between Bank of Canada dates. That is why a five-year fixed quote in July and a five-year fixed quote in October can disagree while the variable discount still reads as the same number of points off prime.

Nothing below is a forecast of the October 28, 2026 announcement. The arithmetic uses the rates in our files on the day this page was reviewed, and it says which file. A lender's offer can sit away from both.

In the reported-rate file dated October 18, 2026, covering September 19, 2026 to October 18, 2026 (448 usable reports), the 30-day median 5-year fixed rate where insured status was not stated is 4.35% after rounding to the nearest 0.05 (N = 40). The Big Five posted median beside that cell is 5.15%. The 5-year variable median in the same window, insured status not stated, is 3.55% (N = 129), against a Big Five posted median of 4.15%. A separate uninsured 5-year fixed cell, where people stated that status, is 4.35% (N = 27). These figures are self-reported by Canadian borrowers online. Self-reported, unverified, and not a mortgage offer. Posted rates on the homepage, the 5-year fixed page, and the variable page are a different dataset. Do not average them together.

The rounded gap between those two medians is 0.80%. The variable median of 3.55% is 0.90% under big-bank prime of 4.45%, and the reported-rate file's own median prime discount on that 5-year variable cell is 0.90 points. In the same 30-day window, 92.5% of the 5-year fixed reports with insured status not stated sit below the Big Five posted median (N = 40), and 97.7% of the matching variable reports do (N = 129). Those shares are self-reported by Canadian borrowers online. They describe the file. They do not describe the rate you will be given.

Inside the same file, the week of September 14, 2026 shows a 5-year fixed median of 4.05% (N = 15) and a variable median of 3.51% (N = 23). The week of October 12 shows 4.39% fixed (N = 28) and 3.55% variable (N = 53). The variable row is 3.55% at both ends. The fixed row is higher in October. The posted snapshot tells the same story from lender pages. Across 90 days from July 28, 2026 to October 26, 2026, prime stays 4.45%. The lowest uninsured 5-year fixed rate ranges from 3.74% to 4.59% and ends at 4.59%. The lowest insured 5-year variable ranges from 2.95% to 3.44%. Best-in-file is not a median and not an offer. It shows fixed postings moving while prime did not. Reported rates are on real mortgage rates. Posted shelves are on 5-year fixed and variable. The comparison page puts a live pair side by side.

Same mortgage, two contracts, payments recalculated the way an adjustable-rate mortgage does it. Balance $500,000. Amortization 25 years, which is also the remaining amortization, so the payment formula matches the mortgage calculator. Fixed rate 4.35%, the rounded reported 5-year fixed median. Variable rate 3.55%, the rounded reported 5-year variable median, held flat. The fixed payment is $2,737. The variable payment is $2,517. The difference is $220 a month, about $13,213 of payments over five years.

Interest over those 60 months is about $19,388 higher on the fixed contract. The fixed borrower also owes about $6,175 more at the end of the five years, because more of each payment went to interest. Canadian disclosures usually compound semi-annually, so a lender's figure can differ by a few dollars. The gap is the point. On a hold from the Bank of Canada, the variable borrower in this file is paid, every month, for taking the risk that the hold ends.

That payment is not the qualifying payment. OSFI's minimum qualifying rate for an uninsured mortgage at a federally regulated lender is the greater of the contract rate plus 2 percentage points and 5.25%. Both of these contracts clear the floor. The variable file qualifies at 5.55%, with a payment near $3,085 on this balance. The fixed file qualifies at 6.35%, with a payment near $3,329. A lower contract rate is easier to qualify on while the floor is not binding. The stress test guide works the debt ratios. The stress test qualifier runs a file. Insured and uninsured contract rates are different shelves: use the insured and uninsured pages, and the CMHC insurance calculator only when the down payment is under 20%.

The day-one break-even is the gap itself. If prime rises 0.80% immediately and the discount stays 0.90%, the variable contract becomes 4.35%, the same as the fixed median used here. The payment becomes $2,737 and the five-year interest matches the fixed case. Any smaller immediate, permanent hike leaves the variable borrower ahead on this illustration. Any larger one leaves the fixed borrower ahead. Prime today is 4.45%, so that break-even prime is 5.25%. A single Bank of Canada move has recently been a quarter point. The 0.80% gap is more than three of those steps, taken all at once, on the day the term starts, and then held for five years.

A slower path is the more honest stress. Raise the variable rate a quarter point at each anniversary and leave the discount alone: 3.55% in year one, then 3.80%, 4.05%, 4.30%, and 4.55% in year five. The payment, recalculated on the remaining amortization, steps from $2,517 to $2,582, $2,646, $2,709, and $2,770. The year-five payment is above the fixed payment of $2,737. Cumulative interest over the 60 months is still about $7,779 lower than the fixed contract, because the first years were cheap. The payment can cross before the interest does. A household that can afford the crossed payment, and that cares about the five-year interest bill, is still ahead on this path. A household that needed the payment to stay at $2,517 is not.

A cut runs the other way. Drop prime half a point on day one and hold it, and the variable rate is 3.05%. The payment is $2,384. Interest over five years is about $12,007 lower than the flat variable case, and further below the fixed case. The October 28 decision can do that, or the opposite, or nothing. The fixed contract ignores it until renewal. Price the renewal of either term with the renewal offer checker and the renewal playbook when the five years are the decision, not the monthly payment.

Some variable contracts keep the payment fixed at the amount set on day one. On this $500,000 illustration the opening payment is $2,517. Interest on the full balance equals that payment when the contract rate is about 6.04%. With a 0.90% discount, that is prime near 6.94%, about 2.49% above today's 4.45%. Past that line, the payment does not cover the interest, the balance starts to grow, and the lender's trigger-rate clause tells you what happens next. Common versions ask you to raise the payment, make a lump sum, or convert to a fixed rate. The clause is in the contract. As the balance falls, the trigger rate creeps up, so the day-one figure is the strictest one.

Qualifying the variable contract at 5.55% produces a payment near $3,085. That is the test for getting the loan. The trigger rate is the test for a fixed payment that no longer covers interest. An adjustable-rate mortgage raises the payment instead. Ask which of the two you were offered. A conversion option locks the lender's fixed rate on the day you convert.

A fixed borrower who may sell, separate, or refinance is not only buying a payment that sits still. FCAC describes the usual closed-term penalty as the higher of three months' interest and the interest rate differential. Lenders reach for the differential when the contract rate is above current rates. Many bank contracts measure that differential off posted rates and then subtract the original discount, which makes the fee larger than the gap a new customer can see. The penalty guide works both methods. The posted versus discounted guide is why the shelf rate exists. The penalty calculator runs the simple version.

A variable contract usually has no interest rate differential. The typical charge is three months' interest. That is a reason variable wins for a household that expects to break the term, even when the starting rate is not the whole argument. It is a weak reason for a household that will finish the term and cannot absorb a higher payment. The comparison of banks, monolines, and credit unions is about that penalty clause as much as it is about the rate. Read the information box. A reputation is not your commitment.

Insured status changes the contract rate more often than it changes this logic. A high-ratio loan is insured, and the premium is already in the balance. The term choice does not refund it. A straight renewal later is a different decision from the one on this page, and the stress test does not automatically come back. That exemption is described in the renewal playbook. If the plan is to break the term early and borrow more, you are in a refinance, and the qualifying rate applies again.

Use the mortgage calculator for a payment at one rate, and run it twice, once at the fixed offer and once at the variable offer. Use the renewal offer checker if the quote in your hand is a renewal rather than a purchase. Use the CMHC insurance calculator when the down payment is under 20%, then remember that the calculator's premium bands and the insurer's current schedule can differ. The real mortgage rates page is the reported distribution behind the medians on this page. Posted shelves are on 5-year fixed, variable, insured, and uninsured. The figures people report are self-reported by Canadian borrowers online. The disclaimer applies: this is the arithmetic, and the commitment is the contract.

The payments use this site's formula, annual rate divided by 12. Confirm the semi-annual figure, the prime, and the penalty method with the lender before you sign.

• Bank of Canada, September 2, 2026. Target overnight rate held at 2.25%. Bank Rate 2.50%. Deposit rate 2.20%. Next announcement October 28, 2026.
• Bank of Canada, policy interest rate. The target has been 2.25% at each announcement from October 29, 2025 through September 2, 2026.
• OSFI, minimum qualifying rate. Greater of the contract rate plus 2% or 5.25% for uninsured mortgages at federally regulated lenders.
• FCAC, prepayment penalties. The greater of three months' interest and the IRD, and the posted-rate method.
• FCAC, preparing to get a mortgage. The qualifying rate for insured and uninsured mortgages when the stress test applies.