The Short Answer

Fixed or variable mortgage in 2026? As of late 2026, five-year variable rates (around 3.4-3.5%) are actually lower than five-year fixed rates (around 4%), because the Bank of Canada has held its rate at 2.25%. Variable offers a lower starting rate but comes with the risk that rates could rise, while fixed offers payment certainty. Many buyers are weighing the lower variable rate against forecasts that variable rates may climb over the next couple of years. The right choice depends on your risk tolerance and situation — and this isn't financial advice.

One of the biggest decisions Markham buyers face isn't just which home to buy — it's how to finance it. And in 2026's unusual rate environment, the fixed-versus-variable question has a genuinely interesting twist. Michael John Lau, a top real estate agent in Markham and a CPA/CMA, breaks down the landscape (though your mortgage professional should make the call with you).

Important: This is general information about the rate environment, not mortgage or financial advice. Rates change constantly, everyone's situation is different, and the fixed-versus-variable decision should be made with a qualified mortgage professional. Figures below are approximate as of late 2026 and will change.

The 2026 Rate Landscape

To understand the choice, start with where rates sit. As of late 2026:

The Bank of Canada is holding at 2.25%

After cutting substantially from a peak of 5.0% (in 2024), the Bank of Canada has held its policy rate at 2.25% through a series of announcements — a "higher-for-longer" pause amid inflation and economic uncertainty. This directly shapes variable rates.

Variable rates are lower than fixed — for now

Here's the twist: five-year variable rates (around 3.4-3.5%) are currently lower than five-year fixed rates (around 4%). This is somewhat unusual and reflects the current rate environment. A buyer choosing variable today would start with a lower rate than a comparable fixed.

Fixed rates follow bond yields

Fixed mortgage rates track government bond yields (not directly the Bank of Canada rate), and yields have stayed elevated amid inflation and global uncertainty — keeping most five-year fixed rates around or above 4%.

Mortgage rate calculations and loan options documentation on desk
Comparing fixed and variable mortgage rates requires evaluating long-term financial stability against potential short-term savings.

Fixed vs. Variable: The Core Trade-Off

Fixed-rate mortgages: certainty

A fixed rate locks your interest rate (and payment) for the term. The benefit is certainty and predictability — your payment won't change regardless of what rates do, which provides peace of mind and easy budgeting. The trade-off in 2026: you start at a higher rate than variable, and if rates fall, you don't benefit (without breaking the mortgage, which can carry penalties).

Variable-rate mortgages: lower start, more risk

A variable rate moves with the lender's prime rate (which tracks the Bank of Canada). The benefit in 2026: a lower starting rate. The trade-off: if the Bank of Canada raises rates, your rate — and potentially your payment — rises. Variable requires comfort with that uncertainty.

The Key Consideration for 2026: Where Are Rates Headed?

The crux of the decision is the outlook — and here's the nuance that matters this year. While variable rates are lower today, many forecasts suggest the Bank of Canada's rate is more likely to hold or gradually rise than fall significantly in the near term (a "higher-for-longer" view). Some projections have variable rates climbing over the next couple of years, potentially eroding their current advantage over fixed. This complicates the usual "variable saves money" logic:

If you choose variable

You benefit from the lower rate now, but take on the risk that rates rise and erode (or reverse) that advantage over your term. You need to be comfortable with potential payment increases and have some financial cushion.

If you choose fixed

You pay a bit more now for certainty, and you're protected if rates rise. Given forecasts leaning toward rates holding or rising, many buyers value that protection — though you give up savings if rates unexpectedly fall.

Nobody can predict rates with certainty. Forecasts are just forecasts — economic and geopolitical conditions can shift the outlook quickly (as they have repeatedly). The decision isn't about perfectly predicting rates; it's about your risk tolerance, your financial cushion, and which trade-off (lower-but-uncertain vs. higher-but-certain) fits your situation and lets you sleep at night.

Questions to Guide Your Decision

What's your risk tolerance?

Would potential payment increases cause you real stress, or can you handle that uncertainty comfortably? Fixed suits those who value certainty; variable suits those comfortable with fluctuation.

What's your financial cushion?

Do you have room in your budget to absorb higher payments if a variable rate rises? A cushion makes variable's risk more manageable.

What's your time horizon and plans?

How long will you keep the mortgage/home? Your plans affect which option — and which term — makes sense.

What does your mortgage professional advise?

Most importantly: work with a qualified mortgage broker or specialist who can assess your full situation, run the numbers, and advise on the best option and lender for you. This is their expertise.

The Bottom Line

In 2026's environment, variable rates are lower than fixed — but with forecasts leaning toward rates holding or rising, the decision is genuinely nuanced. Fixed offers certainty at a higher starting cost; variable offers a lower start with more risk. There's no universally right answer — it depends on your risk tolerance, cushion, plans, and comfort. The essential step is working with a mortgage professional to make the choice that fits you.

Michael John Lau, one of Markham's leading REALTORS® and a CPA/CMA, helps buyers understand the financial landscape of their purchase — and works alongside trusted mortgage professionals to ensure clients make well-informed decisions. While your mortgage specialist handles the rate decision, Michael brings a financial lens to your overall home-buying strategy. If you're planning a purchase in Markham, let's talk about the bigger picture.

Frequently Asked Questions

Should I choose a fixed or variable mortgage in 2026?▼
It depends on your risk tolerance and situation, and this isn't financial advice. As of late 2026, variable rates (around 3.4-3.5%) are lower than fixed (around 4%), but forecasts lean toward rates holding or rising, which could erode variable's advantage. Fixed offers certainty; variable offers a lower start with more risk. Work with a mortgage professional to decide.
Why are variable rates lower than fixed rates in 2026?▼
As of late 2026, the Bank of Canada has held its policy rate at 2.25% (down from a 5.0% peak), keeping variable rates around 3.4-3.5%. Fixed rates track government bond yields, which have stayed elevated amid inflation and global uncertainty, keeping most five-year fixed rates around or above 4%. This creates the unusual situation of variable being lower than fixed.
Are mortgage rates going to rise in Canada?▼
Many 2026 forecasts suggest the Bank of Canada's rate is more likely to hold or gradually rise than fall significantly in the near term (a 'higher-for-longer' view), with some projections showing variable rates climbing over the next couple of years. However, forecasts can shift quickly with economic and geopolitical conditions. Consult a mortgage professional for current guidance.

Understand Your Financing Picture

Michael John Lau, REALTOR® CPA, CMA, brings a financial lens to your home-buying strategy and works alongside trusted mortgage professionals. Planning a purchase? Let's talk.

Book a ConsultationExplore Buyer Services