Should I choose a fixed or variable mortgage rate in BC?

How Each Type Works

Fixed Rate

Your interest rate is locked for the term (commonly 1, 2, 3, or 5 years). Your payment stays the same regardless of what the Bank of Canada does. Predictability is the primary advantage.

Variable Rate

Your rate moves with the lender's prime rate, which tracks the Bank of Canada's overnight rate. Variable rates are expressed as "prime minus a discount" (e.g., prime – 0.50%). When the BoC cuts, your rate drops. When it raises, your rate rises.

When Fixed Makes More Sense

• You value payment certainty — especially with a tight budget
• You're buying your primary home and plan to stay for the full term
• You're a first-time buyer getting comfortable with homeownership costs
• Your income is variable or commission-based

When Variable Can Make Sense

• You have flexibility and could absorb a rate increase
• You're likely to sell or refinance within 1–3 years
• You believe rates have peaked and will fall during your term
• You're an investor optimising for cash flow

The Often-Overlooked Factor: Prepayment Penalties

This is where the decision gets real. Breaking a fixed rate mortgage early typically triggers an Interest Rate Differential (IRD) penalty — which can run into the tens of thousands of dollars.

Breaking a variable rate mortgage early is usually capped at 3 months' interest — far more predictable and often much smaller.