Fixed vs. Variable Mortgage: What’s the Right Choice?

Fixed vs. Variable Mortgage in 2025: What Canadian Homebuyers Need to Know

If you're thinking of buying a home or renewing your mortgage, one question is top of mind: Should I choose a fixed or variable mortgage rate? The answer depends on your financial goals, risk tolerance, and the current economic climate. In this post, we break down the key differences between fixed and variable mortgages—and help you decide which one is right for you.

What Is the Difference Between Fixed and Variable Mortgages?

• Fixed Rate Mortgage: The interest rate stays the same for the entire term (usually 1–5 years). Your monthly payments are predictable and won't change—great for budgeting and stability.

• Variable Rate Mortgage: The interest rate can fluctuate based on changes to the lender's prime rate, which is influenced by the Bank of Canada’s key interest rate. Your payments may stay the same, but the portion that goes toward interest vs. principal can change.

Why It Matters in 2025

Canada's mortgage market in 2025 is shaped by economic uncertainty, inflation pressures, and the Bank of Canada’s cautious stance. After holding the key interest rate steady for several months, experts anticipate potential rate cuts later in the year—but nothing is guaranteed.

A fixed-rate mortgage might be the better option if:

• You want predictable monthly payments

• You plan to stay in your home for the full mortgage term

• You think rates will rise in the next few years

A variable-rate mortgage could be smarter if:

• You can handle potential payment changes

• You want to benefit from possible rate drops

• You’re comfortable with market fluctuations

When Should You Lock In or Go Variable?

Timing your mortgage decision is just as important as the type you choose. Here’s what to consider:

• Buying in early 2025? Fixed may offer security while rates remain high.

• Expecting rate cuts later this year? Variable might save you money long-term.

• Renewing soon? Ask your broker to model both scenarios based on your amortization.

The Hybrid Mortgage Option

Can’t decide? Some lenders offer hybrid mortgages—a portion of your loan is fixed, and a portion is variable. This lets you hedge your bets.

Final Thoughts: Get Personalized Mortgage Advice

There is no one-size-fits-all answer. Your income, lifestyle, and financial goals all play a role. Before committing to a mortgage type, talk to a licensed mortgage broker who can run the numbers and tailor a plan for your situation.

At Arise Mortgage, we help you compare fixed and variable mortgage rates in real time, with expert guidance you can trust. Reach out to us today!