Heightened geopolitical tensions in the Middle East have pushed oil prices higher and added new inflation risks, contributing to recent volatility in bond markets. At the same time, Canada is in the middle of a record wave of mortgage renewals, with more than one million mortgages set to be renegotiated in 2026 alone.
For borrowers with mortgages maturing this year, that combination is bringing renewed attention to a familiar question: fixed or variable? If your mortgage is maturing, it’s more than just a routine renewal—it’s an opportunity to review your full financial picture, including your monthly debt payments, and revisit your decision between fixed and variable rates as the gap between the two widens again.
In recent weeks, global uncertainty has pushed fixed rates higher, while variable rates have remained lower than fixed. That’s made variable an attractive option for borrowers looking to reduce their monthly payments, but it’s important to consider all factors when comparing mortgage options.
Why variable rates are back in focus
After a period where fixed rates dominated, variable rates are gaining attention again.
The main reason is pricing. Variable rates have come down alongside the Bank of Canada’s easing cycle, as they are directly influenced by changes to the policy rate, which has fallen from a peak of 5.0% in mid-2024 to 2.25% today. Combined with the recent rise in fixed rates, that has opened up a noticeable gap, with some variable rates now as much as half a percentage point lower than comparable fixed options.
For borrowers, that can translate into immediate savings.
But those savings come with uncertainty. Variable rates can move over the term, and while rates have already come down, the path from here is far less certain. Inflation, economic conditions and global factors can all shift the outlook. In other words, today’s lower rate doesn’t necessarily mean lower costs over the life of the mortgage.
What to consider before choosing
The decision between fixed and variable is ultimately about more than just rate, it’s about how much risk and flexibility you’re comfortable with.
Here’s a quick way to think about the trade-offs:
Fixed rate
- Locks in your payment and removes uncertainty
- Protects you if borrowing costs rise or stay elevated
- Typically comes with higher or more complex penalties if you need to sell or refinance mid-term
- Best suited if you value stability and predictable budgeting
Variable rate
- Typically offers a lower starting rate today
- More flexible, often with lower pre-payment penalties if you break early
- May benefit if rates ease further, but comes with uncertainty
What makes the decision more complex today is how both options are behaving. Fixed rates are being driven by bond market volatility, while variable rates move with changes to the Bank of Canada’s policy rate and are less predictable than they were even a few months ago.
There’s no obvious choice right now.
The most important factor is your personal financial situation and risk tolerance. This isn’t about trying to time the market, it’s about understanding how you’ll respond to different scenarios and potential changes to your financial situation. Would rising payments create stress, or are you comfortable with some fluctuation? Do you expect to move or have a need to access equity in the next few years?
There’s no one-size-fits all solution, and your mortgage renewal isn’t just a checkbox. It’s an opportunity to reassess your strategy and make sure it still aligns with today’s market and your financial goals.
If your mortgage is coming up for renewal, now is a good time to explore both options and understand what each could mean for you.