Should you convert your variable rate into a fixed rate?

You could, but it’s kind of like saying to yourself that rather than waiting to see what happens, you would like to start paying the higher rate and increased payment right away.

Why wait for the increase? Let’s pay more right away, starting with the next payment. It almost sounds ridiculous when put into that context, but that is exactly what you would be doing.

You could use the same logic when trying to decide between fixed and variable on a new mortgage. Over the past 40+ years, people have generally come out ahead with a variable-rate mortgage.

Again, that doesn’t mean everyone should be choosing variable. What’s right for one person, may not be right for the next.

To take a variable at the moment, you need to have the outlook that inflation will get under control in the near term and then rates are going to come down, and you want to take advantage of that shift.

Borrowers who are still choosing a variable rate may also do so because they like the flexibility it offers, especially with the likelihood of a large penalty if they choose a fixed-rate mortgage and then break it.

When rates come back down, breaking those fixed rates can cause some really big penalties when the market rates are lower than the fixed rate that you have. 

So if you need more flexibility, or there’s a reasonable chance you might break it during the term, that’s when a variable rate should be considered. However, it’s crucially important that you understand the effect of rate increases on your budget.

The right decision comes down to the way you feel and what you’re most comfortable with. If you think you’ll become extremely anxious watching the prime rate increase while you sit on the sidelines, then converting to a fixed would be worth considering.

The Bottom Line

It’s important to note, there’s no one size fits all mortgage advice and everyone’s situation is different. So the answer to the question of whether you should convert your variable rate to a fixed rate largely depends on your financial situation, goals, plans for the next few years and level of risk tolerance.

Sometimes the best decision is not the one that saves you the most money, it’s the one that allows you to sleep soundly at night. There’s a lot to be said for peace of mind. 

Tatum Neufeld, BComm
Mortgage Broker • Mortgage Tailors
[email protected]

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Oh hey there! I’m Tatum.

Whether you are looking to buy a home, renew an existing mortgage, refinance to pull out equity, consolidate debt, or finance revenue properties, I’ll give you personalized advice and creative mortgage solutions based on your financial situation.


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