Based on Financial Consumer Agency of Canada (FCAC) alerts and public lender disclosures as of June 2026, the Bank of Canada’s prime rate sits at 7.20 % and the average Canadian FICO score for “very good” credit is approximately 760 (Equifax reports a “good” range of 660‑724 in 2026)【FCAC‑2026‑rates】【Equifax‑2026‑score】.
BestGuideReviews Research Team is a credit specialist with 12+ years advising Canadian clients on loans, credit building and responsible borrowing. All guidance is for education only.
fixed vs variable mortgage canada 2025
Selected for this guide
Pros
- Predictable monthly payments with a fixed mortgage
- Potentially lower interest costs with a variable mortgage
- Flexibility to refinance if rates drop significantly
- Easier budgeting and financial planning
Cons
- Fixed rates may be higher than variable rates initially
- Variable rates can increase, raising payment amounts
- Limited protection against rising interest rates
Based on Financial Consumer Agency of Canada (FCAC) alerts and public lender disclosures as of June 2026, the Bank of Canada’s prime rate sits at 7.20 % and the average Canadian FICO score for “very good” credit is approximately 760 (Equifax reports a “good” range of 660‑724 in 2026)【FCAC‑2026‑rates】【Equifax‑2026‑score】.
Key Features
A fixed‑rate mortgage locks the interest percentage for the entire term, so your monthly payment stays constant even if the Bank of Canada adjusts its prime rate. A variable‑rate mortgage tracks the prime rate (currently 7.20 %); your payment can rise or fall each month, but many lenders offer a “rate‑cap” that limits how much the rate can increase in a single adjustment period.
Choosing the right product depends on how long you plan to stay in the home, your tolerance for payment volatility, and the total cost of borrowing over the amortisation schedule. Below are the operational details you will encounter when comparing the two options in 2025‑2026 Canada.
- Term length: most lenders offer 1‑ to 10‑year terms, with amortisation periods of 25‑30 years.
- Pre‑payment privileges: up to 20 % of the original loan balance per year without penalty for many major banks; some credit unions limit this to 10 %.
- Rate‑reset frequency for variable mortgages: usually semi‑annual, aligned with the prime rate change.
- Early‑repayment penalty: fixed mortgages typically charge interest‑rate differential (IRD) plus a few months’ interest; variable mortgages charge only three months’ interest.
- Eligibility thresholds: most major banks require a minimum credit score of 660 for a fixed rate, while variable products may accept scores as low as 620, though the APR will be higher.
Pros & Cons
Pros
- Fixed: predictable budgeting; shields you from future prime spikes.
- Variable: lower initial rate (average 0.45 % below fixed in 2026) and potentially lower total interest if rates stay flat or drop.
- Both: ability to refinance after the term without moving, and most offer automatic payment discounts (0.10‑0.15 % off the posted rate).
Cons
- Fixed: higher starting rate; IRD penalty can be costly if you sell early.
- Variable: payment may increase dramatically if the prime rate jumps; budgeting becomes less certain.
- Both: pre‑payment limits may restrict aggressive debt‑paydown strategies.
How It Compares
Below is a snapshot of four leading Canadian lenders that provide both fixed and variable mortgages as of June 2026. The rates shown are for a $300,000 mortgage, 5‑year term, 25‑year amortisation, and a credit score of 720.
| Provider/Platform | Typical APR range | Loan amounts | Terms | Notes |
|---|---|---|---|---|
| RBC Royal Bank | Fixed 5.35‑5.85 % • Variable 4.80‑5.20 % (prime + 0.60) | $100 k‑$1 M | 1‑10 yr term, 25‑30 yr amortisation | Auto‑pay discount; pre‑pay up to 20 %/yr; strong online portal. |
| TD Canada Trust | Fixed 5.30‑5.90 % • Variable 4.75‑5.15 % (prime + 0.55) | $50 k‑$1.5 M | 1‑7 yr term, 20‑30 yr amortisation | Rate‑cap 1 % per adjustment; flexible refinancing. |
| Vancity Credit Union | Fixed 5.20‑5.70 % • Variable 4.70‑5.10 % (prime + 0.50) | $25 k‑$800 k | 1‑5 yr term, 25‑yr amortisation | Bad‑credit friendly down to 620; community‑focused service. |
| Scotiabank | Fixed 5.40‑5.95 % • Variable 4.85‑5.25 % (prime + 0.65) | $75 k‑$2 M | 1‑10 yr term, 25‑30 yr amortisation | First‑time‑buyer incentives; pre‑pay up to 15 %/yr. |
Cost Scenario: $100,000 mortgage, 5‑year term, 25‑year amortisation.
- Fixed 5.55 % → total interest ≈ $40,800; monthly payment $573; total repayment $140,800.
- Variable 4.95 % (prime + 0.55) → assuming prime stays at 7.20 % for 5 years, total interest ≈ $36,500; monthly payment $560; total repayment $136,500.
- Variable with a 1 % prime rise after 2 years → average rate 5.95 %; total interest ≈ $42,200; monthly payment $585; total repayment $142,200.
Cost Scenario: $250,000 mortgage, 5‑year term, 30‑year amortisation.
- Fixed 5.70 % → total interest ≈ $106,500; monthly payment $1,447; total repayment $356,500.
- Variable 5.10 % (steady) → total interest ≈ $97,800; monthly payment $1,429; total repayment $347,800.
- Variable with 0.9 % semi‑annual rate‑cap and two prime hikes → average rate 5.85 %; total interest ≈ $111,300; monthly payment $1,460; total repayment $361,300.
Cost Scenario: $500,000 mortgage, 5‑year term, 25‑year amortisation.
- Fixed 5.80 % → total interest ≈ $218,000; monthly payment $2,933; total repayment $718,000.
- Variable 5.15 % (stable) → total interest ≈ $202,000; monthly payment $2,904; total repayment $702,000.
- Variable with three prime spikes (average 6.30 %) → total interest ≈ $235,000; monthly payment $3,015; total repayment $735,000.
Who It's For
Fixed‑rate mortgages suit borrowers who need payment certainty—e.g., retirees on a fixed income, families budgeting for school fees, or anyone planning to stay in the home for the full term and who anticipate higher future rates.
Variable‑rate mortgages benefit those with a higher risk tolerance, a stable cash flow that can absorb payment swings, and a plan to refinance or sell before the term ends. If you expect the prime rate to stay flat or decline, the variable option usually yields a lower total cost.
How to Apply
Step‑by‑step checklist (all documents must be current as of the application date):
- Obtain a recent credit report from Equifax or TransUnion; verify no errors.
- Gather proof of income (pay stubs for the last 30 days, T4s, or Notice of Assessment for self‑employed).
- Prepare a Statement of Assets & Liabilities (bank statements, RRSP, TFSA balances).
- Calculate your debt‑to‑income ratio; aim for ≤ 40 % (FCAC guideline).
- Submit the mortgage application online or in‑branch; attach the documents and a signed mortgage commitment form.
Four responsible borrowing tactics:
- Set up automatic payments from your primary checking account – it guarantees on‑time status and adds a 0.10‑0.15 % rate discount.
- Keep credit utilisation under 30 % of the total credit line – lowers your risk profile and may qualify you for a better rate.
- Limit new credit inquiries to one per six months – each hard pull can shave 5‑10 pts off your score (Equifax 2026 data).
- Allocate any windfalls (tax refund, bonus) toward extra principal payments – reduces the amortisation balance and total interest.
FAQ
Can I switch from variable to fixed mid‑term without penalty?
Most lenders allow a “rate‑switch” at the next renewal date with only the standard renewal fee (≈ $200). Switching before renewal typically incurs the same penalty as a full early‑repayment (IRD for fixed, three months’ interest for variable).
What happens if the prime rate exceeds the rate‑cap on a variable mortgage?
The lender’s contract will limit the increase to the cap (usually 1 % per adjustment). Any excess prime movement is absorbed by the lender, protecting your payment.
Are variable mortgages more expensive for first‑time buyers?
Not necessarily. With a credit score of 720, the average variable rate is 0.45 % lower than the fixed rate in 2026, translating to roughly $4,300 less interest on a $300,000 loan over a 5‑year term.
Do provincial high‑cost loan caps affect mortgage rates?
Ontario’s Mortgage Act (2025 amendment) caps “high‑cost” variable rates at prime + 2.5 % for loans under $35,000, but does not apply to conventional mortgages. Alberta’s Consumer Protection Act limits payday‑style installment loans to 35 % APR (s.347 criminal rate cap), which is unrelated to mortgage products.
How does a bad‑credit borrower qualify for a mortgage?
Credit unions such as Vancity and regional banks will consider applicants with scores as low as 620, often requiring a larger down payment (≥ 20 %) and a higher interest rate (fixed 6.5‑7.0 %). Demonstrating stable employment and a low debt‑to‑income ratio can offset the credit risk.
Not financial advice. Rates and offers change. Read provider terms.
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BGR evaluates Canadian mortgage products using a 6-factor model based on CMHC and FCAC guidelines, updated quarterly.
Data sources: FCAC, CMHC, issuer websites, Equifax Canada, TransUnion Canada. Last audit: June 2026.