Variable mortgage rates are on the rise, which might have some homeowners wondering if they should switch to a fixed rate before interest rates increase any further.

But just because variable rates are moving higher, that doesn’t mean it’s a “foregone conclusion that everyone should be switching to fixed,” said James Laird, co-founder of rate comparison website, in an interview.

A spring report from the Canada Mortgage and Housing Corporation said 53 per cent of Canadians opted for a variable-rate mortgage in the second half of last year, a substantial jump compared to the first half of 2021, when 34 per cent chose a variable rate. The report said while that trend continued into this year, it appears to have plateaued in the wake of rising interest rates.

For homeowners who are considering converting to a fixed rate from variable, the good news is there’s no penalty to do so. However, the homeowner must stick with their current lender and take the fixed rate that’s currently being offered.

“You can’t shop around. You just call your lender and say, ‘Hey, I'd like to convert to a fixed rate.’ They say, ‘Okay, our current fixed rate is this’, and you have to kind of take that,” Laird said.

When switching to a fixed rate, homeowners must convert to a term that’s either equal or greater to the remaining time on their current mortgage term. If there are three years left on the mortgage term, a homeowner would have to switch to at minimum a new three-year term. Another option would be to switch to a new five-year fixed-rate term. The one key rule is that switching to a fixed rate can not shorten the mortgage term.

With mortgage rates moving higher, the difference, or spread, between variable and fixed rates has been growing, according to data from the CMHC report. shows five-year variable rates can range from roughly 2.50 to 3.35 per cent, while five-year fixed rates are currently ranging from 4.14 per cent to as high as 6.04 per cent.

“If you can’t sleep at night and you’re really worried about what’s happening with variable rates, then maybe taking a fixed rate and locking in a rate that’s just about two per cent higher than you’re paying today is worth it just to give you the peace of mind,” David Larock, president and mortgage broker at Integrated Mortgage Planners Inc., said in a phone interview.

“There’s no question people are nervous. It’s not a good feeling to have a lot of uncertainty on such a big expense,” he said, although he added that most of the clients he works with are still choosing variable rates.

Larock said there are two reasons for that. One is the fact that variable rates are still lower compared to fixed rates; and the second, he said, is that some of his clients aren’t convinced the Bank of Canada will be able to keep interest rates elevated for a long time because of the impact on the economy.


For homeowners, both experts agree that choosing a variable rate comes down to risk tolerance.

Laird said if a homeowner doesn’t have a high risk tolerance, they should be in a fixed-rate mortgage. Similarly, if their household budget is tight and there’s not a lot of wiggle room to handle potentially rising payments, a fixed rate is more appropriate.

He also said a variable rate might work better for homeowners who have a smaller home loan balance or who might have to break their mortgage contract.

“The faster someone is paying down their mortgage, or if they have a small balance remaining, a variable becomes more appropriate because if you're paying down your mortgage quickly, the rate today is the most material because your balance is higher today and is going to drop rapidly by next year,” Laird said.

“Another thing to think about is if there’s a chance you're going to be breaking the mortgage anytime soon, then you definitely want to stay variable. If you think you might sell the house and move somewhere else – the penalty to break a variable is a lot cheaper than to break a fixed rate.”

Historically, Laird said variable rates have proven to be cheaper compared to fixed.

For borrowers who want to choose a variable rate and want to safeguard against an increase in their payments, Larock said one strategy could be to figure out what their payment would hypothetically be if they had a fixed rate — then make mortgage payments based on that higher amount. That way, he said, the homeowner will benefit from the excess cash going towards the principal payment as a lump sum; and if variable rates rise, the extra cushion is already built into the homeowners’ budget.