🧠 Fixed vs Variable Mortgages: What’s Better in 2025?

Introduction

With interest rates fluctuating throughout 2025, Canadian homebuyers face a crucial decision: Should you choose a fixed or variable mortgage? Both options have unique benefits, and the right choice depends on your financial goals, risk tolerance, and the current rate environment.

What Is a Fixed-Rate Mortgage?

A fixed-rate mortgage offers stability — your interest rate and monthly payments remain the same throughout the term. This is ideal for borrowers who want predictability and protection against future rate hikes.

Benefits:

• Consistent monthly payments

• Easier budgeting

• Protection from interest rate increases

Drawbacks:

• Higher initial rates

• Potential missed savings if rates drop
  
  What Is a Variable-Rate Mortgage?

  A variable-rate mortgage (VRM) is tied to the Bank of Canada’s policy rate, meaning your payments may rise or fall as rates change. These mortgages often start with lower rates than fixed ones, making them attractive for short-term savings.

  Benefits:

  • Lower starting interest rates

  • Opportunity to save when rates decrease

  Drawbacks:

  • Risk of higher payments if rates rise

  • Harder to budget long-term
    
    
    

Conclusion

In 2025, both fixed and variable mortgages offer distinct advantages depending on your situation. Evaluate your risk tolerance, income stability, and future plans before deciding. Consulting with a mortgage broker like RateShop can help you secure the best rate and term for your needs.