Fixed vs Variable Mortgage at Renewal

Choosing between fixed and variable isn't a one-time decision made when you first buy — it resets every time your mortgage comes up for renewal. What made sense for your last term isn't automatically the right call for your next one.

The choice resets at every renewal

You're not locked into repeating your previous rate type. If you had a fixed-rate term and it's ending, you can choose variable at renewal, and vice versa. The right answer depends on where rates are relative to each other right now, not what they were when you first signed.

How fixed and variable are priced differently

Variable rates move with the Bank of Canada's overnight rate through your lender's prime rate. As of August 2026, prime has held at 4.45%, unchanged since October 2025 across six consecutive Bank of Canada decisions — meaning variable-rate borrowers have had a stretch of payment stability, though they remain exposed to whichever direction the Bank of Canada moves next.

Fixed rates are priced off Government of Canada bond yields, not the overnight rate. As of mid-August 2026, 5-year bond yields have climbed to roughly 3.1–3.3%, pushed up by oil-price pressure tied to Middle East conflict and rising US Treasury yields — putting upward pressure on fixed rates even while the Bank of Canada itself holds steady. Insured 5-year fixed rates currently sit in the 4.10–4.25% range (Ratehub, nesto, August 2026 data).

What today's rate gap looks like

Right now, fixed rates sit meaningfully above the prime rate that variable mortgages are priced against — a gap that reflects bond markets pricing in more near-term uncertainty than the Bank of Canada's own rate decisions suggest. That gap narrows or widens over time, which is exactly why this comparison is worth redoing at every renewal rather than assumed to be constant.

How to decide

A few questions worth answering honestly before choosing:

• How would your budget handle a payment increase if variable rates moved up before your next renewal?
• Are you the kind of homeowner who wants payment certainty, even at a rate premium — or comfortable with some fluctuation in exchange for potentially lower long-term cost?
• How long do you realistically expect to hold this mortgage before your next major decision point (renewal, sale, refinance)?

Neither fixed nor variable is universally better — it's a fit question, not a right-answer question.

For a closer look at how this fits into your overall renewal strategy, see our full renewal & switch guide.

If you want the bigger picture on renewal strategy beyond just fixed vs. variable, our mortgage renewal guide covers the full process.