🔒 Fixed Rate Mortgages

• Rate locked for entire term
• Predictable payments
• Protection from rate increases
• Typically higher starting rate
• Higher penalties to break

📊 Variable Rate Mortgages

• Rate tied to prime rate
• Payment can change
• Lower starting rate typically
• Can benefit from rate drops
• Lower penalties to break

🎯 Making Your Decision

• Consider your risk tolerance
• Budget flexibility matters
• Rate environment outlook
• How long you plan to stay
• Stress-test worst case

📖 Week 5 Playbook

Complete guide to choosing between fixed and variable rates in BC's 2025 market, with expert analysis and decision frameworks.

📚 Rate Types Guide

In-depth resource covering all mortgage rate types, prime rate mechanics, and strategic timing for BC homebuyers.

📐 Term vs Amortization

Understand the difference between mortgage term and amortization, and how they affect your rate type choice.

📄 Decision Sheet

Printable decision sheet with comparison checklist, risk assessment, and personalized worksheet.

What's the difference between fixed and variable mortgage rates in Canada?

Fixed rates are locked in for your entire mortgage term (typically 1-5 years) and won't change regardless of market conditions. Variable rates fluctuate with the prime rate and are typically quoted as 'Prime ± spread' (e.g., Prime - 0.95%). Variable rates often start lower but can increase or decrease during your term.

How does prime rate affect my variable mortgage?

Variable mortgage rates are based on the prime rate set by Canadian banks. If you have a variable rate of Prime - 0.95% and prime is 6.45%, your rate is 5.50%. When prime increases by 0.25%, your rate increases to 5.75%, raising your payment. Prime rate typically follows Bank of Canada policy rate decisions.

Which is better: fixed or variable rate in 2025?

It depends on your situation and rate outlook. Historically, variable rates have saved money about 70% of the time over 5-year periods. In 2025, with rates potentially stabilizing, variable offers lower starting rates but payment uncertainty. Fixed provides stability but typically higher initial costs. Consider your risk tolerance, budget flexibility, and rate expectations.

What happens if prime rate increases significantly?

With a variable rate, your payment increases when prime rises. Use this calculator to stress-test scenarios - if prime increases 2%, you'll see exactly how much your payment rises. If the increase is more than you can handle, a fixed rate provides payment certainty. Consider your budget cushion and risk tolerance.

Can I switch from variable to fixed during my term?

Most lenders allow you to convert from variable to fixed during your term without penalty, but you'll get the current fixed rate (not your original rate). You typically cannot switch from fixed to variable without breaking your mortgage and paying penalties. Check your mortgage contract for specific conversion options.

What is the breakeven point for fixed vs variable?

The breakeven point shows how much prime can increase before variable costs exceed fixed. This calculator computes this automatically. For example, if breakeven is +1.25%, variable saves money as long as prime doesn't rise more than 1.25% during your term. Beyond that, fixed would have been cheaper.