Fixed vs Variable Mortgage Rates: Which Is Right in 2026?

Picking between a fixed and variable mortgage rate is one of the biggest money decisions you'll make as an Edmonton buyer. In 2026 the math has shifted: the Bank of Canada cut its policy rate to 2.25%, variable rates are now cheaper than fixed for many borrowers, and for the first time since 2022 more Canadians are choosing variable. Here is how to decide which one fits your situation.

How fixed and variable rates actually work

A fixed-rate mortgage holds the same interest rate for your entire term, so your payment never changes. The Financial Consumer Agency of Canada (FCAC) describes fixed rates as staying the same for your whole term and usually sitting higher than variable rates. That extra cost buys you certainty.

A variable rate moves up and down during the term. It tracks your lender's prime rate, which in turn follows the Bank of Canada's policy rate. When the Bank cuts, your interest cost drops; when it hikes, your cost rises.

The two rate types are priced off completely different benchmarks. Variable rates move with each lender's own prime rate, while fixed rates follow the yield on the Government of Canada's 5-year bond. That is why fixed and variable can move in opposite directions in the same month.

The 2026 picture: why variable came back

For three years, nervous borrowers piled into fixed rates to escape rising payments. That trend reversed. CMHC reports that in February 2026, variable-rate mortgages became the most popular choice at chartered banks, capturing 42% of newly extended mortgages, the first time variable beat fixed since 2022.

The traditional 5-year fixed is fading too. Only 11% of mortgages extended in February 2026 used the classic 5-year fixed term, while shorter fixed products of three to less than five years captured 35%. Borrowers want flexibility while they wait to see where rates settle.

The Bank of Canada sets its policy rate on eight fixed dates per year, so variable-rate holders get fairly predictable decision points to watch.

A worked example on a real Edmonton price

Let's anchor this to the local market. The median sold price for an Edmonton residential home is $472,576, and those homes sell in about 29 Days on hômm at 99.1% of list price. This is not a soft market, so your rate choice matters on a real purchase, not a hypothetical.

Say you buy near that median with 20% down, leaving a mortgage around $378,000 on a 25-year amortization. At the Bank of Canada's posted 5-year fixed rate of 6.09%, your payment is locked and predictable. A variable rate priced off today's 4.45% prime would typically start lower, freeing up cash flow now, but it floats if the Bank changes course.

The gap between starting payments is real money each month. Plug your own price, down payment, and amortization into our free Edmonton mortgage payment calculator to see the exact fixed-versus-variable spread on your numbers before you commit.

The renewal wave changes the stakes

Whatever you choose, renewal risk is the backdrop. The Bank of Canada estimates about 60% of all outstanding Canadian mortgages renew in 2025 or 2026, and roughly 60% of that group will see payment increases.

The pain is concentrated in fixed-rate holders who locked at pandemic-era lows. The Bank of Canada notes that 5-year fixed borrowers renewing in 2025 or 2026 face higher payments, though it expects the average increase to be smaller than earlier rate expectations implied; more than 90% of these borrowers will face increases smaller than they were stress-tested for. Variable holders face a wide range of outcomes at renewal: some see meaningful decreases, while those who hit negative amortization can see large increases, so your contract terms matter.

The penalty trap: where variable usually wins

If there is any chance you'll sell, refinance, or break your mortgage early, the penalty math heavily favours variable. Under FCAC guidance for federally regulated lenders, breaking a closed variable-rate mortgage costs three months' interest. Breaking a closed fixed-rate mortgage costs the higher of three months' interest or the Interest Rate Differential (IRD), and the IRD can run into thousands of dollars.

Lenders must disclose which method they used and describe every component of the penalty formula in plain language. Still, the IRD surprises people every year.

Trigger rates: the variable risk to understand

Variable comes with one technical risk. Many variable mortgages keep your payment fixed even as the rate floats, which means rate hikes send more of each payment to interest and less to principal. The point where 100% of your payment goes to interest is your trigger rate.

The Bank of Canada defines the trigger rate as the rate at which the interest portion equals your whole payment, leaving nothing for principal. Your trigger rate depends on your initial contractual rate and your term to maturity, not the size of your loan. With prime at 4.45% in mid-2026, most new variable borrowers sit well below their trigger, but it is worth asking your lender exactly where yours is.

There is a consumer protection here too. The FCAC expects federally regulated lenders not to charge prepayment penalties when a variable, fixed-payment borrower at or near their trigger rate makes a lump-sum payment to avoid negative amortization.

Frequently Asked Questions

Is a variable or fixed mortgage cheaper in 2026?

Variable rates are priced off the 4.45% prime rate and typically start lower than the 6.09% posted 5-year fixed rate as of June 10, 2026. Variable became the most popular choice at chartered banks in February 2026 at 42% of new mortgages. But "cheaper" depends on where rates move during your term, so a variable rate that looks cheaper today can cost more if the Bank of Canada hikes.

How does the Bank of Canada affect my mortgage rate?

The Bank of Canada sets the policy rate, currently 2.25%, on eight fixed dates per year. That rate drives the prime rate banks use for variable mortgages and lines of credit, currently 4.45%. Fixed rates do not follow prime; they track the 5-year Government of Canada bond yield instead, so they can move independently.

What is a trigger rate on a variable mortgage?

The trigger rate is the interest rate at which your entire mortgage payment goes to interest and none to principal, on a variable mortgage with fixed payments. Your specific trigger rate depends on your initial rate and your term to maturity, not the size of your loan. If you reach it, your lender may require a higher payment or a lump sum.

Which mortgage has a smaller penalty if I break it early?

Variable almost always has the smaller penalty. Under FCAC guidance for federally regulated lenders (banks), breaking a closed variable mortgage costs three months' interest, while breaking a closed fixed mortgage costs the higher of three months' interest or the Interest Rate Differential (IRD). Note that Alberta credit unions are provincially regulated and may use different penalty structures — always confirm with your specific lender. The IRD can be several times larger, so variable is friendlier if you might move or refinance.

Should first-time Edmonton buyers choose fixed or variable?

It depends on your budget cushion. With the median Edmonton residential home selling at $472,576 in about 29 Days on hômm, payments are real and competition is steady. If a rate increase would strain your budget, fixed gives certainty. If you have room to absorb swings and want the cheaper break penalty, variable can work. Run both scenarios on our mortgage calculator first.