Quick answer: Take the cheaper variable rate only if you could still carry the fixed-rate payment without strain. As of September 30, 2026, the best insured 5-year variable we tracked was 3.70% and the best insured 5-year fixed was 4.54%. On a $450,000 mortgage over 25 years, that’s about $2,295 a month variable against $2,501 fixed, a $206 head start. Variable would have to rise 0.84 points before its payment caught up. Nobody can tell you whether it will.
When variable is this much cheaper, the question isn’t really “fixed or variable?” It’s whether the lower payment is worth not knowing what your rate will be next year. Here’s how to decide with numbers rather than a gut feeling. For the basics of how each type works, start with fixed vs variable for Ottawa homebuyers.
How much cheaper is variable right now?
Here’s an example on an insured $450,000 mortgage (less than 20% down) over 25 years. The rates are the best insured 5-year rates we tracked as of September 30, 2026. The variable rate is an effective rate: the lender’s prime rate minus a discount.
| 5-year variable | 5-year fixed | Difference | |
|---|---|---|---|
| Rate | 3.70% | 4.54% | 0.84 points lower |
| Monthly payment | about $2,295 | about $2,501 | about $206 less |
| Paid over 5 years, if the variable rate never changes | about $137,700 | about $150,100 | about $12,400 less |
| Balance after 5 years, if the variable rate never changes | about $389,700 | about $395,300 | about $5,700 less owing |
The last two rows are a “nothing changes” scenario, not a forecast. They show what the head start is worth if the variable rate stays put for the whole term. It almost certainly won’t stay exactly put, in either direction.
How far can the variable rate rise before it costs more?
On these numbers, the variable payment matches the fixed payment when the rate reaches 4.54%. That’s 0.84 points above where it starts. In quarter-point steps, that’s more than three increases.
Timing matters too. If rates stay low for two years and then rise, the savings you’ve already banked, and the extra principal you’ve paid down, don’t disappear. If rates rise in the first few months, the head start is gone quickly. Matching the fixed payment isn’t the same as costing more over the whole term.
For context, the Bank of Canada’s policy rate was 2.25% and the typical prime rate was 4.45% as of early October 2026 (Bank of Canada). The Bank’s next scheduled decision is October 28, 2026.
Does variable change what you qualify for?
Yes, and buyers often miss this. Every mortgage is stress-tested at the greater of your contract rate plus 2% or 5.25% (OSFI). A lower contract rate means a lower qualifying rate.
| Variable | Fixed | |
|---|---|---|
| Contract rate | 3.70% | 4.54% |
| Qualifying rate | 5.70% | 6.54% |
| Qualifying payment on $450,000 | about $2,800 | about $3,026 |
Put the other way, the income that qualifies you for $450,000 at the fixed rate’s stress-test payment would qualify you for about $486,000 at the variable rate’s. That can help on an Ottawa purchase where you’re just short. But be careful: qualifying for more on a variable rate means borrowing more on the product whose payment can rise. If variable is the only way the numbers work, that’s a reason to slow down, not speed up.
What happens to your payment when rates rise?
It depends on which kind of variable mortgage you have (Financial Consumer Agency of Canada):
- Adjustable payment. Your payment goes up or down with the rate. You feel every change right away, but your mortgage stays on schedule.
- Fixed payment. Your payment stays the same and more of it goes to interest when rates rise. If rates rise far enough to reach the trigger point set out in your contract, your lender may increase your payment.
On the adjustable kind, a half-point rise from 3.70% to 4.20% in our example would raise the payment from about $2,295 to about $2,417 a month. Ask which kind you’re being offered, and find the trigger point in the contract before you sign.
When should you not take the cheaper variable rate?
Skip it if a payment at the fixed rate, or above it, would force you onto credit cards, cut into essentials or keep you up at night. The fixed rate buys certainty, and in this example that certainty costs about $206 a month. For a household with no cushion, that can be money well spent.
Be careful, too, if you’re likely to sell or refinance during the term. Compare the whole contract, not just the rate: prepayment privileges, portability and what it costs to leave early. And this example is insured. Uninsured mortgages, including any home bought with 20% or more down, are priced differently, and your own rate depends on your application and property.
Common questions about taking a variable rate
Is variable better just because it starts lower?
No. A lower starting rate lowers your payment today. Whether it costs less over the term depends on what rates do, and when. Take it only if you could carry the payment at the fixed rate or higher.
How much cheaper is variable than fixed right now?
As of September 30, 2026, the best insured 5-year rates we tracked were 3.70% variable and 4.54% fixed. On a $450,000 mortgage over 25 years, variable starts about $206 a month lower.
Does a variable rate help me qualify for a bigger mortgage?
Usually, yes. You’re stress-tested at the greater of your contract rate plus 2% or 5.25%, so a lower variable rate means a lower qualifying rate. Borrowing more on a variable rate also means more exposure if rates rise.
What is a trigger point on a variable mortgage?
On a variable mortgage with fixed payments, the trigger point is the rate level, set out in your contract, at which your lender may increase your payment because the existing payment no longer keeps the mortgage on schedule.
Can I switch from variable to fixed later?
Many lenders let you convert to a fixed rate during the term, usually at their fixed rate on the day you convert, which may be higher than today’s. Check the conversion terms in your commitment.
What should you do next?
Before you pick, let me run both rates on your actual mortgage: the payment, the qualifying amount and what a few rate increases would do to your budget. Then the choice is about your comfort level, not a guess. Book a 20-minute call with Joshua Tagg.
This is commentary, not advice. Rates and figures as of October 14, 2026. Mortgage rates are the best tracked insured 5-year rates as of September 30, 2026; the mortgage amount is an example. Bank of Canada policy rate as of October 13, 2026 and prime rate as of October 7, 2026. All mortgages are subject to lender and insurer approval. Joshua Tagg, Indi Mortgage.
