I’m often asked about the difference between variable and fixed rate mortgages and which one is better. Let’s first look at what they mean in simple terms:

Variable rate mortgages: interest rate charged on your mortgage changes as interest rates move up or down.
Fixed rate mortgages: interest rate charged on your mortgage remains the same as interest rates move up or down.

Now that we’ve defined our terms, which mortgage type is better for you? The answer will depend on two factors: 1) interest rate forecast when the mortgage is taken out (i.e. are rates going to go up or down), 2) your risk tolerance.

Generally speaking, if interest rates are low, but about to increase, it is better to lock in with a fixed rate mortgage. On the other hand, if interest rates are on the decline, then it would be better to choose a variable rate mortgage. As interest rates fall, so will the interest rate on your mortgage.

So, how should you choose? Today’s interest rate forecast points to at least a few more increases in 2019. Most of us like the security of knowing how much our mortgage payments will be each month and for that reason, many homeowners choose a fixed rate mortgage.