Find Best Variable Mortgage Rates in Canada
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Variable mortgage rates in Canada have dropped significantly since their 2023 peak, when borrowers faced rates above 5%. After nine consecutive rate cuts by the Bank of Canada between June 2024 and October 2025, the lowest available five-year variable rate now stands at 3.35%. This represents the most affordable variable pricing since summer 2022. For homebuyers and those renewing their mortgages, the question is whether these mortgage rates will stay low or climb again.
The Bank of Canada held its overnight rate at 2.25% in March 2026 for the third consecutive announcement. This keeps the prime rate at 4.45%, the benchmark used by lenders to price variable mortgages. While further rate cuts appear unlikely in the near term, the gap between variable and fixed rates remains meaningful. The lowest five-year fixed insured rate sits around 3.89%, creating a spread of roughly 0.54 percentage points in favour of variable.
What Are Variable Mortgage Rates?
A variable mortgage rate changes when your lender’s prime rate changes. The prime rate itself moves in sync with the Bank of Canada’s overnight lending rate. When the Bank cuts its rate, your mortgage interest rate drops. When it raises rates, your costs go up.
Variable rates are typically expressed as prime plus or minus a percentage. For example, if your lender offers prime minus 1.00% and the prime rate is 4.45%, your effective rate would be 3.45%. That discount from prime stays locked for your entire term. Only the prime rate itself fluctuates.
Two main types of variable mortgages exist in Canada. With an adjustable-payment variable mortgage, both your rate and payment amount change when the prime rate moves. Your amortization period stays consistent. With a fixed-payment variable mortgage, your payment stays the same even when rates change. Instead, the split between principal and interest adjusts. If rates rise enough, you could hit your trigger rate, where payments no longer cover the full interest owed.
Current Variable Rates in Canada
As of March 27, 2026, the best high-ratio five-year variable rate in Canada sits at 3.35%. This rate applies to insured mortgages where the down payment is less than 20%. Conventional variable rates for borrowers with larger down payments typically range from 3.40% to 3.60% at online lenders and mortgage brokerages.
| Lender Type | Best 5-Year Variable Rate | Effective Rate (Prime 4.45%) |
|---|---|---|
| Online lenders | Prime – 1.10% | 3.35% |
| Mortgage brokerages | Prime – 1.05% | 3.40% |
| Credit unions | Prime – 0.90% | 3.55% |
| Big Six banks | Prime – 0.50% to Prime – 0.80% | 3.65% to 3.95% |
The Big Six banks offer less competitive variable rates. RBC currently advertises 3.65%, while BMO sits at 4.10% and CIBC at 4.05%. National Bank, Scotiabank, and TD fall within this range. These posted rates can often be negotiated lower, particularly for borrowers with strong credit profiles or existing banking relationships.
Rates and terms may vary by financial institution. The prime rate at all major Canadian banks currently stands at 4.45%, but the discount each lender offers from prime varies based on competition, funding costs, and risk assessment.
How Variable Rates Work
Variable mortgage rates respond directly to Bank of Canada policy decisions. When the Bank adjusts its overnight lending rate, lenders typically update their prime rate within days. Your mortgage rate moves by the same amount.
The Bank of Canada uses its overnight rate to manage inflation and support economic growth. When inflation runs high, the Bank raises rates to cool spending. When the economy weakens, it cuts rates to stimulate activity. Between June 2024 and October 2025, the Bank delivered nine consecutive cuts, reducing the overnight rate from 5.00% to 2.25%.
- Rate transparency: Your lender must disclose your discount from prime in your mortgage contract, making future rate changes predictable
- Payment flexibility: Most variable mortgages allow you to convert to a fixed rate mid-term without breaking your mortgage
- Lower penalties: Breaking a variable mortgage typically costs three months’ interest, compared to the potentially high interest rate differential penalties on fixed mortgages
The mortgage stress test applies to variable rates just like fixed rates. Borrowers must qualify at the higher of 5.25% or their contract rate plus 2%. Since adding 2% to the current best variable rate of 3.35% gives you 5.35%, most variable-rate borrowers now qualify at their contract rate plus 2%.
Adjustable vs Fixed-Payment
The type of variable mortgage you choose affects how rate changes impact your budget. With an adjustable-payment variable mortgage, your monthly payment rises or falls with the prime rate. If the Bank of Canada raises its overnight rate by 0.25%, your payment increases by the corresponding amount. On a 500,000-dollar mortgage at 3.45%, a quarter-point increase would add roughly 104 dollars to your monthly payment.
Fixed-payment variable mortgages keep your payment stable regardless of rate movements. When rates drop, more of your payment goes toward principal. When rates rise, more goes toward interest. This creates budget certainty but introduces trigger rate risk. If rates climb high enough that your payment no longer covers the interest portion, you face negative amortization. Your lender will contact you to either increase your payment or make a lump-sum payment toward principal.
Variable vs Fixed Rates
The choice between variable and fixed rates depends on your view of future Bank of Canada policy and your tolerance for payment changes. As of March 2026, the lowest five-year variable rate sits at 3.35%, while the best five-year fixed insured rate stands at 3.89%. This 0.54 percentage point spread represents immediate savings for variable-rate borrowers.
| Rate Type | Current Best Rate | 5-Year Interest Cost (500k mortgage) | Payment Stability |
|---|---|---|---|
| 5-year variable | 3.35% | 82,950 (if rate holds) | Changes with prime |
| 5-year fixed | 3.89% | 96,480 | Locked for full term |
| Potential savings | 0.54% spread | 13,530 over 5 years | Depends on rate path |
Historical data shows variable rates have outperformed fixed rates roughly 80% of the time over long periods. However, past performance does not guarantee future results. The Bank of Canada’s March 2026 messaging suggests rate cuts are on pause. If inflation rises due to global factors like energy prices or geopolitical tensions, the Bank could raise rates again.
- Payment unpredictability: Variable rates can rise multiple times during your term, potentially straining your budget if income stays fixed
- Trigger rate exposure: Fixed-payment variable mortgages risk negative amortization if rates climb significantly
- Renewal timing risk: If rates spike near your renewal date, you could face sharply higher payments when switching terms
Fixed rates offer payment certainty. Your rate and payment stay locked for the full term, making budgeting straightforward. This protection costs you the current 0.54 percentage point premium. Whether that premium is worth paying depends on your financial situation and your confidence in the Bank of Canada’s ability to keep rates stable.
Factors That Affect Your Rate
Several economic and market factors determine the variable mortgage rates available to you. The Bank of Canada’s overnight lending rate sits at the centre. When the Bank adjusts this policy rate, lenders respond by changing their prime rate. Your mortgage rate moves in lockstep.
- Inflation trends: Rising inflation pushes the Bank to raise rates to cool spending, while falling inflation creates room for cuts
- Employment data: Strong job creation and wage growth signal economic strength, often leading to higher rates
- Economic growth: When GDP expands rapidly, the Bank may tighten policy to prevent overheating
- Global events: Trade disruptions, commodity price shocks, and international monetary policy influence Canada’s economic outlook
- Lender competition: Each institution sets its own discount or premium to prime based on funding costs, risk appetite, and market positioning
Your personal credit profile also affects the rate you receive. Borrowers with credit scores above 720, stable employment, and down payments of 20% or more typically qualify for the deepest discounts from prime. Those with lower credit scores or smaller down payments face higher rates or may need to seek alternative lenders.
Down Payment Impact
The size of your down payment affects both your rate and your qualification process. Mortgages with down payments below 20% require mortgage default insurance from CMHC, Sagen, or Canada Guaranty. These insured mortgages often qualify for lower rates because the lender’s risk is reduced. The best variable rate of 3.35% typically applies to high-ratio insured mortgages.
Conventional mortgages with down payments of 20% or more do not require insurance. Lenders price these mortgages slightly higher to reflect the additional risk. Expect conventional variable rates to sit 0.05% to 0.15% above insured rates at the same institution. However, you avoid the insurance premium, which can cost up to 4% of your mortgage amount.
Risks You Should Know
Variable mortgage rates carry distinct risks that differ from fixed-rate products. Payment volatility tops the list. Unlike fixed mortgages where your payment stays constant for years, variable rates can change multiple times during your term. The Bank of Canada could raise its overnight rate in response to inflation or economic overheating, pushing your costs higher.
Between March 2022 and July 2023, the Bank raised its overnight rate from 0.25% to 5.00%. Borrowers with variable-rate mortgages saw their rates climb by 4.75 percentage points in roughly 16 months. On a 500,000-dollar mortgage, this translated to an additional 1,600 dollars per month in payments for those with adjustable-payment products.
- Budget strain: Rapid rate increases can push your housing costs beyond comfortable levels, particularly if your income does not grow at the same pace
- Trigger rate threshold: Fixed-payment variable mortgages can reach a point where your payment no longer covers the interest owed, forcing you to increase payments or pay down principal
- Renewal shock: If rates spike during your term, your renewal could lock in a much higher rate than you started with
- Qualification limits: Rising rates during your term do not change your existing mortgage, but they could limit your ability to refinance or access home equity
The trigger rate phenomenon became widespread in 2023. Borrowers with fixed-payment variable mortgages found their payments insufficient to cover interest charges as rates climbed. Lenders contacted these borrowers to either increase monthly payments or make lump-sum principal payments. Some chose to convert to fixed rates to avoid further uncertainty.
Most variable mortgages include a conversion option that lets you lock into a fixed rate mid-term without breaking your mortgage. This feature provides an exit strategy if rate volatility becomes uncomfortable. However, the fixed rate you lock into will be your lender’s current posted rate for the remaining term, which may be higher than the best available fixed rates in the market.
Who Should Choose Variable?
Variable mortgage rates suit borrowers who can handle payment fluctuations and believe rates will stay stable or decline. With the current best variable rate at 3.35% compared to 3.89% for fixed, you save 0.54 percentage points immediately. Over five years on a 500,000-dollar mortgage, that spread could save you roughly 13,500 dollars if rates hold steady.
- Income flexibility: You have variable income or expect income growth that could absorb potential payment increases
- Economic outlook: You expect the Bank of Canada to hold or cut rates based on weak economic growth or controlled inflation
- Short timeline: You plan to sell or refinance within one to three years and want to minimize interest costs in the near term
- Rate conversion option: You value the flexibility to convert to fixed if market conditions change
- Lower penalties: You might need to break your mortgage early and want to avoid steep interest rate differential charges
Before choosing a variable rate, stress-test your budget. Calculate your payment if the Bank of Canada raises its overnight rate by 1% or 2%. On a 500,000-dollar mortgage at 3.35%, a 1% increase would raise your monthly payment by roughly 280 dollars. A 2% increase would add about 560 dollars. If these scenarios strain your budget, a fixed rate might offer better peace of mind.
Consider your risk tolerance and time horizon. If you plan to stay in your home for five years or more and prefer payment certainty, the 0.54 percentage point premium for a fixed rate might be worth paying. If you expect to move or refinance within a few years, the lower variable rate and smaller break penalties could save you thousands. Compare your options using our comparison tools to see which approach fits your situation.
Bottom Line
Variable mortgage rates in Canada now sit at their lowest levels since mid-2022, with the best five-year rates around 3.35%. This pricing reflects nine consecutive Bank of Canada rate cuts and creates a meaningful spread versus fixed rates. The 0.54 percentage point advantage over fixed rates could save you thousands if the Bank holds its overnight rate steady or cuts further. However, the Bank’s March 2026 messaging suggests rate cuts are on pause while it monitors inflation and global economic risks.
Your choice between variable and fixed rates depends on your budget flexibility and economic outlook. Variable rates offer immediate savings and conversion options but expose you to payment volatility. Fixed rates cost more upfront but deliver payment certainty for your full term. Stress-test your budget against potential rate increases before committing. If a 1% to 2% rate rise would strain your finances, the fixed-rate premium might be worth the cost.
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Variable Mortgage Rates – FAQ
What is the best variable mortgage rate in Canada right now?
The best five-year variable mortgage rate in Canada is currently 3.35% for high-ratio insured mortgages. This rate is typically expressed as prime minus 1.10%, with the prime rate at 4.45%. Conventional variable rates with down payments of 20% or more range from 3.40% to 3.60% at online lenders and brokerages. Rates and terms may vary by financial institution.
How do variable mortgage rates work in Canada?
Variable mortgage rates change when your lender’s prime rate changes. The prime rate moves in sync with the Bank of Canada’s overnight lending rate. Your rate is expressed as prime plus or minus a discount. When the Bank cuts its overnight rate, your mortgage rate drops by the same amount. When it raises rates, your rate increases.
What is the difference between adjustable and fixed-payment variable mortgages?
Adjustable-payment variable mortgages change both your rate and payment when the prime rate moves. Your amortization stays consistent. Fixed-payment variable mortgages keep your payment stable, but the split between principal and interest shifts. If rates rise significantly, fixed-payment variables can hit a trigger rate where payments no longer cover full interest.
Will variable mortgage rates go down in 2026?
Further rate cuts appear unlikely in the near term. The Bank of Canada held its overnight rate at 2.25% in March 2026 for the third consecutive announcement. The Bank indicated it is monitoring inflation risks from energy prices and geopolitical tensions rather than planning additional cuts. Variable rates are more likely to remain stable unless economic conditions weaken significantly.
What are the risks of choosing a variable mortgage rate?
Variable rates expose you to payment volatility when the Bank of Canada raises its overnight rate. Your interest costs can increase multiple times during your term. Fixed-payment variable mortgages risk hitting a trigger rate where payments no longer cover interest, leading to negative amortization. Renewal timing can also lock you into higher rates if the economy shifts.
How much can I save with a variable rate versus a fixed rate?
The current spread between the best variable rate (3.35%) and best fixed rate (3.89%) is 0.54 percentage points. On a 500,000-dollar mortgage over five years, this could save roughly 13,500 dollars in interest if rates hold steady. However, your actual savings depend on Bank of Canada policy decisions during your term. Rates and terms may vary by financial institution.
Can I convert my variable mortgage to a fixed rate?
Most variable mortgages in Canada include a conversion option that lets you lock into a fixed rate mid-term without breaking your mortgage. You can typically convert at any time for the remaining term. The rate you receive will be your lender’s current posted rate, which may be higher than the best available market rates.
What is the mortgage stress test for variable rates?
Borrowers must qualify at the higher of 5.25% or their contract rate plus 2%. As of March 2026, the best variable rate is 3.35%. Adding 2% gives you 5.35%, which exceeds the 5.25% benchmark. This means most variable-rate borrowers now qualify at their contract rate plus 2%, demonstrating they can handle payment increases if rates rise.
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