Where rates stand (October 8, 2026)
- The Bank of Canada held its policy rate at 2.25% on September 2, 2026. Its next scheduled decision is October 28, 2026.
- Ratehub reports lenders’ prime rate at 4.45%.
- The lowest advertised 5-year fixed rate on Ratehub was 4.34%, and the lowest 5-year variable was 3.40%. These are best-case insured rates and many borrowers will be quoted more.
Variable rates move with your lender’s prime rate, which follows the Bank of Canada. Fixed rates follow bond yields, so they can rise or fall even when the Bank holds.
How fixed and variable differ
| Fixed rate | Variable rate | |
|---|---|---|
| Rate during the term | Stays the same | Moves when prime changes |
| Payment | Stays the same | Changes with the rate (adjustable) or stays the same while the interest share changes (fixed-payment variable) |
| Typical rate today | Usually higher | Usually lower |
| Usual penalty to break early | Higher of 3 months’ interest or the IRD | Usually 3 months’ interest |
| Best fit | You want a predictable budget | You can absorb higher payments if rates rise |
FCAC warns that a variable rate with fixed payments may be riskier than it looks. When rates rise, more of each payment goes to interest. In extreme cases none of it reaches principal and the balance grows.
Worked example: $400,000 with 20 years left
Using the lowest advertised rates above on monthly payments, and assuming each rate stays the same for the full 5-year term:
| Fixed 4.34% | Variable 3.40% | |
|---|---|---|
| Monthly payment | $2,487.89 | $2,294.47 |
| Interest over 5 years | $78,849.51 | $61,371.69 |
| Balance after 5 years | $329,576.11 | $323,703.49 |
If rates never moved, the variable rate would cost about $193.42 a month less and save roughly $17,478 in interest over the term. But variable rates do move. If the variable rate were one percentage point higher, at 4.40%, the payment on the same balance would be $2,500.51, slightly above the fixed payment. In other words, the variable option only keeps its edge if its rate rises by less than about one point on average over your term.
Our calculator uses semi-annual compounding for every example. Some variable mortgages compound differently, so your lender’s numbers may differ a little.
Questions to ask yourself
- Could your budget handle a payment a few hundred dollars higher for a while?
- Might you sell, move or refinance during the term? A lower penalty can matter more than a lower rate.
- Would a shorter fixed term or a hybrid (part fixed, part variable) be a fair middle ground?
- If you renew into a lower payment, could you keep paying the old amount to pay the loan off faster?
Getting ready to renew? Our Canadian mortgage renewal checklist (CAD $4.99, one-time download on Gumroad) lists the documents to gather and the questions to ask. Educational only.
Frequently asked questions
Should I choose fixed or variable at mortgage renewal in 2026?
It depends on your budget and risk tolerance. On October 8, 2026, the lowest advertised 5-year variable rate on Ratehub (3.40%) was below the lowest 5-year fixed rate (4.34%), but variable payments can rise if prime goes up. A fixed rate gives a predictable payment for the whole term.
What is the Bank of Canada rate right now?
The Bank of Canada held its policy rate at 2.25% on September 2, 2026. Its next scheduled announcement is October 28, 2026.
Is it cheaper to break a variable mortgage than a fixed one?
Usually. Breaking a closed variable-rate mortgage typically costs three months’ interest, while a closed fixed-rate mortgage usually costs the higher of three months’ interest or the interest rate differential, which can be much larger.
What is the risk of a fixed-payment variable mortgage?
When rates rise, more of each fixed payment goes to interest. FCAC warns that in extreme cases none of the payment goes to principal and the amount you owe can grow.
Try it with your numbers
Open the free calculator, enter the balance, rate and amortization from your own mortgage statement, then switch the payment frequency or add an extra monthly amount. It uses the same Canadian semi-annual compounding as the examples on this page.
Related guides
Sources
- Bank of Canada: Policy rate held at 2.25% (Sept. 2, 2026)
- Ratehub: Best 5-year fixed mortgage rates (Oct. 8, 2026)
- Ratehub: Best 5-year variable mortgage rates (Oct. 8, 2026)
- FCAC: Choosing a mortgage that is right for you
- FCAC: Mortgage fees and prepayment penalties
Checked October 8, 2026. Rules and rates change, so confirm with your lender or the official page before you act.