Fixed vs. Variable: Which Mortgage Rate Is Actually Saving Canadians Money in 2025?

Deciding between a fixed or variable mortgage rate can feel like a coin toss, especially in a shifting interest rate environment. But in 2025, there are some trends and facts you should know before you bet.

Let’s dive in.

What’s Changed in 2025 (So Far)

• In March 2025, the Bank of Canada cut its policy rate from 3.00 percent to 2.75 percent.

• Many economists expect further cuts later in the year.

• Fixed rates are tied to longer-term bond yields and may not drop as fast as variable rates.

• The Bank of Canada estimates that many borrowers renewing fixed-rate mortgages in 2025 and 2026 could see payment increases of 15 to 20 percent compared to their 2024 payments.

• For variable-rate borrowers, especially those with adjustable payments, some may see declines of 5 to 7 percent if rate cuts continue.

In short, variable rates have room to move downward if the trend continues, while fixed rates offer more predictability.

Fixed Rate: Pros, Cons and When It Works Best

Pros

• Predictable payments and long-term stability.

• Protection if interest rates rise again.

• Ideal for peace of mind if you prefer certainty.

Cons

• No benefit from future rate drops.

• Usually comes with a small premium over variable.

• Renewal risk if rates are higher when your term ends.

Best use caseIf you like consistency, are risk-averse, or expect rates to rise again, a fixed rate might be the better choice.

Variable Rate: Pros, Cons and When It Works Best

Pros

• You benefit if interest rates fall.

• Often starts lower than fixed rates.

• Can offer more flexible prepayment and refinance options.

Cons

• Your payments can increase if rates rise.

• Requires room in your budget for potential changes.

• Can cause stress if you prefer predictable payments.

Best use caseIf you have a solid budget, expect rates to trend lower, and can tolerate a bit of uncertainty, a variable rate could save you money in 2025.

What’s Likely to Save Money in 2025

There’s no one-size-fits-all answer, but here’s what current trends suggest:

• If rates fall further, variable rates will likely save more.

• If rates stay flat or climb slightly, fixed rates provide stability.

• Forecasts lean toward gradual rate cuts through late 2025, giving variable rates an advantage for flexible borrowers.

For many homeowners, the best strategy might even be a mix — choosing a shorter-term fixed or hybrid mortgage to capture flexibility without too much risk.

How to Choose What’s Right for You

1. Stress test your budget. Could you handle a rate increase of one or two percent?

2. Consider your timeline. If you plan to move or refinance soon, a variable or shorter-term fixed could make more sense.

3. Think about your comfort level. Peace of mind has real value.

4. Compare the spread. If the gap between fixed and variable is small, fixed might be worth it for predictability.

5. Talk to us. We’ll review your numbers and show you side-by-side scenarios so you can make a confident, informed choice.