Fixed vs. variable in 2026: what actually makes sense right now.

The Bank of Canada has held its overnight rate steady at 2.25% through early 2026, and the five-year government bond yield, the benchmark that drives fixed mortgage rates, has been hovering around 3.1%. So where does that leave borrowers choosing between fixed and variable?

The Case for Variable in 2026

Variable rates are currently sitting around 4.10% to 4.45% for well-qualified borrowers. With the Bank of Canada signaling that further cuts are possible if inflation stays contained, variable-rate holders could see their rates drop further over the next 12-18 months.

The historical argument for variable still holds: over any 15-year period, variable rates have outperformed fixed rates roughly 80% of the time. The discount you get today on a variable rate gives you a built-in cushion against moderate rate increases.

Variable works best if you: - Can absorb payment fluctuations of $100-200/month - Plan to stay in your home for 5+ years - Want to benefit if rates continue to drop - Have a stable income with room in your budget

The Case for Fixed in 2026

Fixed rates for 5-year terms are sitting around 4.34% to 4.89% depending on the lender and your profile. That's historically attractive, and it gives you complete certainty for the next five years.

The spread between fixed and variable has narrowed to about 25-40 basis points, which is tight by historical standards. When the spread is this narrow, the "insurance premium" of going fixed is relatively cheap.

Fixed works best if you: - Want payment certainty for budgeting - Are a first-time buyer with a tight budget - Believe rates have bottomed and could rise - Sleep better knowing your payment won't change

What We're Recommending

For most of our clients right now, we're leaning toward a 3-year fixed as a middle-ground option. Here's why:

1. You lock in a competitive rate for 3 years
2. You come up for renewal in 2029 when the rate environment may be more favorable
3. 3-year fixed rates are often 15-25 basis points lower than 5-year fixed
4. You avoid the uncertainty of variable without committing to 5 years

That said, every borrower's situation is different. A self-employed client with variable income might prefer the flexibility of variable, while a first-time buyer stretching into their first home might need the certainty of fixed.

The Bottom Line

The fixed-vs-variable debate is never one-size-fits-all. What matters is matching your mortgage structure to your financial situation, risk tolerance, and life plans. That's exactly what we help our clients figure out. With access to 50+ lenders, we can find the right product regardless of which direction you lean.

Want a personalized rate comparison? Get your free quote, and we'll show you exactly what fixed and variable look like for your specific situation.