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Fixed and variable-rate mortgages

With a fixed-rate mortgage, the interest rate remains the same for the duration of the term. Fixed-rate mortgages used to be the norm in Canada.

Fixed-rate mortgages normally have a longer term, which makes them popular when interest rates are low and the market anticipates a rise in the future. This allows borrowers to “lock in” their mortgage at an interest rate that they hope will be lower than the prevailing rates in the future.

A variable-rate mortgage offers an interest rate that fluctuates with market rates. This type of mortgage differs from a fixed-rate mortgage in that the interest rate charged on the loan may change over the term of the loan. If the market interest rate changes, so will the interest rate on the loan. Any changes made to the amount of payments or the amortization period, at this stage, will result in changes to the loan’s repayment schedule.

A capped variable-rate mortgage is a variable-rate loan for which the lender has set limits on how high or low the interest rate can go. This means that the mortgage interest rate will fluctuate, but the lender guarantees that the borrower will not have to pay a rate higher or lower than the established limit.

Variable-rate mortgages generally offer the option of converting the variable rate to a fixed rate during the course of the term, subject to the conditions set out in the mortgage contract and without penalty.


Last updated on: December 18, 2023
Reference number: 266060