"Should I go fixed or variable?" is one of the first questions buyers ask me once they're pre-approved. The honest answer is that nobody knows where rates are going: not me, not your bank, not the experts on TV. What you can know is where things stand today, how each option behaves, and how much risk your budget can take. Here's all three.
Where rates stand in October 2026
The Bank of Canada held its policy rate at 2.25% on September 2, 2026. It has been at that level since a cut on October 29, 2025, and the Bank has left it unchanged at every scheduled decision in 2026 so far: January, March, April, June, July and September (full history here).
In its September statement the Bank said:
- the economy and inflation were tracking broadly in line with its July forecast
- inflation had been hovering around 3%, mainly because of higher gasoline prices; without gasoline it was 2.2% in July, and core measures were close to 2%
- housing activity had rebounded somewhat after several weak quarters
The next scheduled decision is October 28, 2026, together with a new Monetary Policy Report. The last one of the year is December 9 (2026 schedule).
I don't quote lender rates in posts like this. They change week to week and depend on your down payment, your credit, the term and the lender. Your mortgage specialist or broker can give you a written rate hold, and that's the number that counts.
How fixed and variable work
The Financial Consumer Agency of Canada (FCAC) explains the trade-off like this:
| Fixed | Variable | |
|---|---|---|
| Your rate during the term | Stays the same | Can go up or down |
| Typical starting rate | Usually higher than variable for a similar term | Usually lower than fixed for a similar term |
| What moves it | Set when you sign | Priced off your lender's prime rate |
| Main risk | Paying more if rates fall | Paying more if rates rise |
Two things worth understanding:
- Variable rates follow the Bank of Canada. The Bank explains that changes in its policy rate lead to similar changes in short-term rates, including the prime rate that banks use to price variable-rate mortgages. Fixed rates depend mostly on what it costs your lender to raise money.
- Variable with fixed payments is its own risk. Some variable mortgages keep your payment the same when rates move. FCAC warns that when rates rise, more of each payment goes to interest, and your contract has a trigger point where your payment may no longer cover it. Ask which kind you're being offered.
There's also a middle path: a hybrid mortgage, part fixed and part variable, which gives partial protection either way.
The stress test doesn't care which you pick
Federally regulated lenders must check that you could afford your payments at a higher qualifying rate: the greater of 5.25% or your contract rate plus 2%. That applies to insured and uninsured mortgages (FCAC; OSFI).
So with any contract rate under 3.25%, you qualify at 5.25%. A lower rate makes your payment smaller, but it may not raise what you can borrow.
Two related rules worth knowing:
- Switching lenders at renewal. Since November 21, 2024, OSFI doesn't expect lenders to re-apply the stress test when you move an uninsured mortgage to another federally regulated lender at renewal, as long as you don't add to the amount or the amortization. Federal rules also let insured mortgage holders switch lenders at renewal without another stress test.
- 30-year amortizations. Since December 15, 2024, all first-time buyers and all buyers of new builds can choose a 30-year amortization on an insured mortgage, and the price cap for insured mortgages went up to $1.5 million.
The cost nobody budgets for: breaking your mortgage
If you break a closed mortgage early (to sell, refinance or switch), there's a penalty. FCAC says it's usually the higher of:
- three months' interest on what you still owe, or
- the interest rate differential (IRD), a calculation based on the difference between two interest rates over the time left on your term
The IRD can be far larger than three months' interest. FCAC's own example shows a $3,000 three-month penalty against a $12,000 IRD. Before you sign, ask the lender exactly how it calculates the penalty for the mortgage you're choosing, and whether you can port the mortgage to your next home.
How I'd think about the choice
These questions come from FCAC's guidance, and they matter more than any rate forecast:
- Could your budget handle a bigger payment? If a jump would hurt, FCAC suggests a fixed rate may suit you better.
- Will you move or sell before the term ends? If there's a real chance, the penalty and portability rules matter as much as the rate.
- Will you keep an eye on rates? Variable works best for people who are comfortable with their payment or balance changing and who follow rate news.
- How long a term? A shorter term means you renew sooner, at whatever rates are on offer then. A longer one keeps today's terms for longer, so check the penalty in case you need to break it early.
Neither choice is right for everyone. A variable rate isn't a bet you have to win; a fixed rate isn't money wasted. It's about which risk you'd rather carry.
Before you sign
- Get a pre-approval with a rate hold before you shop.
- Compare at least two lenders or use a broker.
- Get the penalty and portability terms in writing.
If you're buying for the first time, my first-time buyer checklist covers down payments and closing costs, and every listing on this site has a calculator for your monthly payment and the land transfer tax.
General information, not financial advice. Rates and rules as of October 2026; confirm details with your lender.