Fixed vs variable in a falling-rate cycle
When the Bank of Canada is cutting, the maths changes. It does not change as much as people assume.
Rateshop Team · Aug 4, 2026 · 5 min read
The fixed-versus-variable debate is usually framed as a forecast. It is better framed as a question about penalties and sleep.
Variable wins on flexibility
The penalty to break a variable mortgage is three months' interest — typically a few thousand dollars. The penalty to break a fixed mortgage is the greater of three months' interest or the interest rate differential, which can run into five figures.
Fixed wins on certainty
If a 75 basis point move would genuinely change how you live, buy the certainty. The premium you pay for a fixed rate is insurance, and insurance is allowed to cost something.
The hybrid nobody mentions
Several lenders will split your mortgage into a fixed portion and a variable portion. It is not a compromise for its own sake — it caps your penalty exposure while keeping some upside.