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Variable rate is out, Fixed rates are in…. But, which term…?

Variable rate mortgageFor more than a decade, I’ve been recommending Variable rate mortgages, as the product of choice. My clients have saved $thousands.  It’s been a great 11 year run..   But now, the strategy has changed slightly.   Read on, to see my newest recommendations..


First, you need to understand the history..  Variable rate had lots of pluses.   It had a lower rate of interest, the penalty can never go over 3 months interest, and you have the option to lock into a Fixed rate at any time.

Being in a Variable meant paying lower rates.  In fact, the difference, compared with Fixed rates, ranged between 1.00% and 3.00%.  This translated to several $$thousand in less interest each year.

My rule for choosing Variable over Fixed was simple… we needed to see at least a 1.00% spread.  It used to be easy.  But today, that spread is gone.  Variable rate pricing isn’t attractive.

Variable rate used to be priced anywhere from Prime less 0.50% to 0.75% and as low at less 1.00% below Prime rate. (Prime rate is 2.70% today).   Best Variable today is around Prime less 0.35% or 2.35%.    Compare that with a 5 yr fixed which can be had at 2.59%… Shorter terms have even lower rates.. (more on that in a minute).   The savings by choosing Variable is either 0.24% or nil.. it may even cost more to be in a Variable rate.  Wow, I don’t recall saying that.. ever.


We’ve been so brainwashed by the BIG SIX BANKS when it comes to choosing a mortgage term.  Ask yourself this:

  • What’s the most popular mortgage product in Canada?  A 5 yr Fixed rate term.
  • What’s the most profitable mortgage product for the BANKS?  A 5 yr Fixed rate term.
  • Which product has proven to save Consumers more money on their mortgage?  A 5 yr Variable rate mortgage.
  • What’s one of the least profitable mortgage products for the BANKS?  A 5 yr Variable rate mortgage.

Get the picture?  We’ve been lulled into a false sense of security by choosing a 5 yr fixed rate all this time.   In fact, it’s actually been the most costly.  Think about that for a minute..

Today, the landscape has changed.  And it’s time to adjust our strategy.  With the spread between 5 yr Fixed and 5 yr Variable being almost nil, we need to look at Fixed rates.

But who says we just need to focus on 5 yr terms?   A quick glance at shorter terms bring some great savings.  Today, we can get the following rates:

  • 2 yr fixed rate 2.19%
  • 3 yr fixed rate 2.34%


5 yr Fixed rates are attractive and still make sense.   But, don’t just choose a 5 yr fixed because that’s what the Banks want.  Explore all available options.  Speak with an experienced Mortgage Broker that isn’t representing just one Bank and offering just one set of products.

Not all mortgages are alike.  The fine print can cost you $thousands.  Choosing the wrong term, the wrong product and the wrong lender or bank, can end up costing you $$thousands.  I’ve shared dozens of examples of consumer that got burned with ridiculous penalties, on this site…. Don’t be one of them.

Your best interest is my only interest.   I reply to all questions and I welcome your comments.  Like this article?  Share with a friend.

Steve Garganis 416 224 0114

Steve Garganis View All

As an industry insider, Steve will share info that the BANKS don't want you to know. Steve has appeared on TV's Global Morning News, CBC's "Our Toronto" and The Real Life TV show. He's also been quoted in several newspapers such as the Globe and Mail, The Toronto Star, The Vancouver Sun, The Star Phoenix, etc.

4 thoughts on “Variable rate is out, Fixed rates are in…. But, which term…? Leave a comment

  1. Hi Steve, thanks so much for you articles, very informative. I am trying to decide if i should go for a 2-yr fixed at 2.24%, 3-yr fixed at 2.39% and 5-yr variable at 2.35. My loan amount is $300,000. I am leaning towards the 2-yr fixed but the 3-yr is tempting. The one question I have is that when it is time to renew, do I need to go through pre-approval and all the hurdles of getting approved?

  2. Hi Steve,
    i have a rental property in Calgary and i want to sell it when the market improve should i take variable or fix and for how long ?

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