Fixed-Rate Mortgage
What it is: Your interest rate stays the same for the entire term (e.g., 5 years), so your monthly payments are predictable.
Pros:
Stability: No surprises if interest rates rise. In 2025, after a volatile few years with the Bank of Canada adjusting rates, this predictability is a big plus.
Budgeting: Easier to plan long-term, especially if you’re on a tight income or expect expenses (e.g., kids, renovations).
Current Rates (as of early 2025): Fixed rates have likely settled after peaking in 2023. Based on trends, a 5-year fixed mortgage might be around 4.5%-5% in Canada right now (e.g., Scotiabank’s posted rates are often a benchmark), though discounts could bring it closer to 4%.
Cons:
Higher starting rate: Fixed rates are usually higher than the initial variable rate because you’re paying for that certainty.
Less flexibility: If rates drop significantly, you’re locked in unless you break the mortgage (which comes with penalties—often 3 months’ interest or an Interest Rate Differential, whichever is higher).

Variable-Rate Mortgage
What it is: The interest rate fluctuates with the Bank of Canada’s prime rate. Payments can be fixed (with the interest/principal split adjusting) or adjustable (payments change with the rate).
Pros:
Lower initial rate: As of February 2025, variable rates might start around 3.5%-4%, reflecting recent softening in inflation and possible rate cuts by the Bank of Canada (e.g., after their December 2024 cut, prime rates could be around 5.95%-6.2%).
Savings if rates fall: Historically, variable rates outperform fixed rates over long periods when rates trend down. Post-2023 tightening, 2025 might see a gradual decline as the economy stabilizes.
Flexibility: Easier to break (penalties are typically 3 months’ interest, no complex differentials).
Cons:
Risk of rising rates: If inflation spikes again or the Bank of Canada hikes rates, your payments (or interest portion) could jump. For example, a 1% increase on a $400,000 mortgage adds ~$300/month if adjustable.
Uncertainty: Harder to budget if your income is fixed or you’re risk-averse.

Which is Best for You?
Choose Fixed If:
You value predictability over potential savings.
You’re on a fixed income or have big upcoming expenses.
You think rates might rise again (e.g., if global uncertainty—like U.S. tariffs or oil prices—spikes inflation).
Example: A $400,000 mortgage at 4.5% fixed (5-year term) = ~$2,225/month consistently.
Choose Variable If:
You can handle payment fluctuations and have financial wiggle room.
You believe rates will stay flat or drop (a reasonable bet for 2025 based on current forecasts).
You’re planning a shorter-term commitment (e.g., selling in 3-5 years).
Example: Same $400,000 at 3.75% variable = ~$2,070/month now, but could rise to $2,370 if rates jump 1%.

Disclaimer: The information provided is sourced from online resources and is intended for general informational purposes only. It does not constitute financial advice. Each individual’s financial needs and circumstances are unique, and decisions should be made based on personal factors. For personalized guidance, please consult qualified mortgage and financial professionals.