Fixed vs. Variable Mortgage Rate: Which Is Right for You in 2026?
/The fixed vs. variable mortgage debate is one of the most common questions I get from Calgary clients — and it's one of the most important decisions you'll make when financing your home. There's no universally correct answer; the right choice depends on your financial situation, your risk tolerance, the current economic environment, and where rates are likely to head. Let's break it all down.
What Is a Fixed-Rate Mortgage?
A fixed-rate mortgage locks in your interest rate for the entire term of your mortgage, most commonly 5 years in Canada. No matter what happens to the Bank of Canada's policy rate, your payment stays the same. This offers certainty and predictability, which is particularly valuable for first-time buyers on a tight budget, or anyone who values financial stability above all else.
The tradeoff is that fixed rates are typically slightly higher than variable rates to start, because the lender is taking on the risk of rate changes. And if rates drop significantly during your term, you won't benefit unless you break your mortgage, which can come with significant prepayment penalties.
What Is a Variable-Rate Mortgage?
A variable-rate mortgage is tied to the lender's prime rate, which moves in response to the Bank of Canada's overnight rate. When the Bank of Canada cuts rates, your variable rate goes down. When it raises rates, yours goes up. In Canada, variable rates are typically expressed as prime minus a discount (e.g., Prime - 0.80%).
Variable rates have historically been lower than fixed rates over the long run. But the 2022-2023 rate hike cycle was a painful lesson for many variable-rate holders who saw their payments increase dramatically in a short period of time. Variable mortgages work best when rates are falling or expected to stay low, and when you have the financial flexibility to absorb potential payment increases.
Where Rates Stand in Early 2026
The Bank of Canada has cut its overnight rate 100 basis points over the course of 2025 and is now holding at 2.25%, citing resilient economic data and inflation running close to its 2% target. This is a significantly lower rate environment than the peak of 5% we saw in 2023. Variable rates have come down meaningfully, and the BoC's guidance suggests the current rate level is 'about right' for the foreseeable future.
Fixed rates, meanwhile, are influenced by Government of Canada bond yields, which have also moderated. The spread between fixed and variable has narrowed, making the fixed vs. variable decision more nuanced than it was during periods of large rate differentials.
How to Decide
Consider these key factors when making your choice:
Choose fixed if: You want certainty, you're buying at the maximum of your qualification amount, you have a fixed income, or you lose sleep over financial uncertainty
Choose variable if: You have financial cushion to absorb payment changes, you expect rates to continue falling, or you plan to break your mortgage before the term ends (variable penalties are typically much lower)
Consider a hybrid: Some lenders offer split mortgages - part fixed, part variable - to balance certainty with flexibility
Conclusion
Both fixed and variable mortgages are legitimate strategies. The key is matching the product to your financial profile. As your Calgary mortgage broker, I'll review the current rates from all my lender partners, model out scenarios for both options, and give you a clear recommendation tailored to your situation.
Ready to Take the Next Step?
Want to compare today's fixed and variable rates side-by-side? Contact Danielle at 403-969-0233 or visit danielledimarco.com/best-mortgage-rates.