FIXED VS VARIABLE RATES — WHAT’S THE REAL DIFFERENCE?

When choosing a mortgage, most people start by asking about the “best rate.”

But the rate alone doesn’t tell you if the product is truly the right fit.

What matters most is understanding how each rate type actually works.

Here’s how fixed and variable rates really differ 👇

1️⃣ Fixed rates — stability and predictability

A fixed rate stays the same for the entire mortgage term.

✔️ payment stays constant

✔️ easier budgeting

✔️ protects you from rising rates

Because the lender carries less risk, fixed rates are often higher than variable rates.

Fixed rates are influenced by lender competition and market conditions.

2️⃣ Variable rates — flexibility and movement

A variable rate can move up or down during your term.

✔️ potential for lower costs

✔️ payment may change

✔️ lender risk is higher

Because payments can fluctuate, qualification rules are often stricter for variable-rate mortgages.

3️⃣ How lenders price fixed rates

Fixed rates are influenced by market conditions and lender competition.

✔️ lenders watch each other’s pricing

✔️ rates adjust as markets shift

✔️ promotions may appear “too good to be true”

Always read the fine print — a low advertised rate may only apply for a short introductory period.

4️⃣ How lenders price variable rates

Variable rates are based on a lender’s Prime rate.

Prime itself is influenced by the Bank of Canada’s decisions.

✔️ Prime may increase or decrease

✔️ payments can rise or fall

✔️ risk depends on economic conditions

Your variable rate is expressed as Prime plus or minus a set amount.

5️⃣ When a variable rate might increase

If economic conditions change, Prime can adjust.

✔️ stronger economy may lead to higher Prime

✔️ weaker economy may lower Prime

✔️ changes affect your mortgage rate

When Prime moves, your mortgage payment may change even if your discount stays the same.

6️⃣ Choosing between fixed and variable depends on your comfort level

There is no universal “best” option.

✔️ fixed = stability

✔️ variable = flexibility

✔️ personal risk tolerance matters

The right choice depends on your income, budget, future plans, and comfort with payment changes.

💬 Final Thought

Fixed rates offer security, while variable rates offer flexibility — the best option depends on your comfort with payment changes and your long-term plans.

If you want help comparing both options side by side, message The Frontline Mortgage Group anytime. 💬