Fixed vs. Variable in 2025: How to Actually Make This Decision

The fixed versus variable question is not philosophical. It is mathematical. Here is how to run the numbers for your specific situation.

Where Rates Sit Right Now

As of early 2025:

• Fixed 5-year rates: roughly 4.5% to 5.1%, depending on the lender and your down payment
• Variable rates: roughly 5.0% to 5.8%, but trending downward as the Bank of Canada continues cutting

The gap between fixed and variable has narrowed. That changes the calculus compared to a year ago.

The Case for Fixed

Fixed gives you predictability. Your payment stays the same for five years regardless of what the Bank of Canada does. If you’re stretching your budget to buy, or if payment stability is important for your peace of mind, fixed is the safer choice.

Fixed tends to win when: rates are low and likely to rise, or when you’re close to your maximum budget and can’t absorb payment increases.

The Case for Variable

Historically, variable-rate borrowers have paid less over the life of their mortgage about 80% of the time. Variable rates move with the Bank of Canada’s overnight rate, so when rates drop, your costs drop too.

Variable tends to win when: rates are high and likely to fall (which is the current environment), and when you have enough financial cushion to handle short-term payment increases.

How to Stress Test Your Mortgage

Before choosing variable, ask yourself: can I handle payments at 2% higher than my current rate? If your variable rate is 5.5%, can you afford payments at 7.5%?

If yes, variable may save you money. If that number makes you uncomfortable, go fixed. Don’t gamble with your housing.

The Amortization Decision Matters Too

Most buyers default to 25 years, but the difference between 25 and 20 years is significant:

On a $800,000 mortgage at 5%:

• 25-year amortization: $4,651/month, total interest roughly $595,000
• 20-year amortization: $5,266/month, total interest roughly $464,000

That’s $131,000 in savings for $615 more per month. Worth thinking about.

The CMHC Factor

If your down payment is under 20%, you’ll pay CMHC insurance:

• 5% to 9.99% down: 4.00% of the mortgage amount
• 10% to 14.99% down: 3.10%
• 15% to 19.99% down: 2.80%

On a $900,000 home with 10% down, that’s $25,110 added to your mortgage. Use our mortgage calculator to see exactly how this affects your payments.

Bottom Line

There’s no universal right answer. The right choice depends on your specific financial situation, risk tolerance, and what rates do over the next five years. What Mark tells every client: make the decision based on math, not emotion.

If you want to talk through what this means for your specific situation, reach out to Mark. The conversation is free. The analysis is real.