Insights & advice
What is a fixed-rate mortgage?
Nov. 2021 – 15 min read
Key takeaways
Fixed-rate mortgages are ideal for homebuyers who want the stability of knowing their payment will stay the same throughout the mortgage term
Fixed mortgage rates are linked closely to mortgage bond yields

What’s in this article?
What is a fixed-rate mortgage?
When you borrow money to purchase a home, the loan is called a mortgage. The percentage of interest the lender charges you to borrow the money is called the mortgage rate.
With a fixed-rate mortgage, the interest rate and your mortgage payment will remain the same throughout your mortgage term.
The mortgage term is the length of time you commit to a particular type of mortgage. It can range from 6 months to 10 years.
Is a fixed-rate mortgage for you?
A fixed-rate mortgage might be for you if:
You have a strict budget and would be challenged to pay other bills if your mortgage payment increased
You like knowing exactly how much your mortgage payment will be
Interest rates are low and/or you think they’re going to increase, and you want to lock in a lower rate to save money
Benefits of a fixed-rate mortgage
Mortgage payment amount stays the same for the entire mortgage term
As you pay down the principal, the amount of interest reduces as well, so more of each payment is applied to the principal
Easier to understand than variable-rate mortgages
What drives fixed mortgage rates?
Fixed mortgage rates are driven mostly by Canadian bond yields, which are influenced by economic factors like unemployment, exports and inflation.
Which mortgage rate type is most popular?
According to Mortgage Professionals Canada - Opens in a new window, about 77% of all mortgages are fixed rate, while the remainder are variable rate (18%), or a combination of fixed and variable rate (5%).
How to choose between a fixed-rate or variable-rate mortgage
If you like knowing your mortgage payment will stay the same, regardless of if mortgage rates rise or fall, then a fixed-rate mortgage is your best choice.
However, if some financial uncertainly doesn’t scare you, because they’ve historically proven to be less expensive, a variable-rate mortgage may be your best choice.
Can I switch my mortgage from fixed rate to variable rate (or vice versa)?
You can change your mortgage rate type at the end of your term when you renew your mortgage.
Some lenders also allow you to convert your variable rate to a fixed rate during your initial term.
As well, some mortgage lenders offer mortgages that are part fixed rate and part variable rate, so that may be an option as well.
What’s next?
Now that you understand more about fixed rate mortgages, you may want to contact your advisor to:
Discuss what mortgage features and rate type best meets your needs
Confirm the size of mortgage you can afford
Check for a competitive mortgage interest rate