Fixed or Variable Rate: What to Do When the Policy Rate Stands Still?
On July 15, the Bank of Canada held its policy rate at 2.25% — the sixth consecutive decision without change. For many of my clients, this stability raises the same question: is this the right time for a fixed rate, or is variable becoming attractive again?
There's no universal answer, but there is a good way to think through the question. Here's where we stand and how I approach it with my clients.
Where the Policy Rate Stands Right Now
Since the beginning of 2026, the Bank of Canada has chosen caution: the announcements in January, March, April, June, and July all resulted in the status quo at 2.25%. The next meetings are scheduled for September 2, October 28, and December 9, 2026.
What emerges from current forecasts by major financial institutions is an expectation of stability for the rest of 2026, with a possible first increase only in the second quarter of 2027 — and even then, gradually. In other words, no one expects surprises before year-end. These forecasts can change based on inflation and the economy; I recommend revalidating them before using them in a decision, especially if you're publishing after August.
What This Means Concretely for Fixed and Variable
The variable rate directly follows the policy rate. With the Bank of Canada in pause mode, the current variable should remain relatively stable in the short term — no decrease on the horizon, but no unpleasant surprises either for now.
The fixed rate doesn't follow the policy rate: it follows the yield on 5-year Government of Canada bonds, which is currently fluctuating in a range of about 3.00% to 3.30%. That's the data to watch if you want to anticipate fixed rate movements, not the headlines about the policy rate.
How to Choose Between the Two
The lowest rate is never the whole story. Here are the questions I systematically ask before recommending an option:
Your risk tolerance. A variable rate can move during your term. If the idea of seeing your payment change stresses you more than what you'd save, fixed remains the right choice for your peace of mind, even if variable looks advantageous on paper.
Your horizon. Are you planning to sell, refinance, or make a major change before the end of the term? Early repayment penalties are generally higher on a fixed rate. If you think you'll move in the coming years, the flexibility of variable may be worth more than the rate difference.
Your capacity to absorb an increase. Even if current forecasts point to stability, a well-prepared file always provides a cushion. If a potential increase would put your budget at risk, fixed removes that variable from the equation.
Total cost, not just the posted rate. Fees, penalties, prepayment flexibility, portability: these elements, along with the rate, determine what a mortgage really costs over its term.
Context Doesn't Replace Your File
These numbers provide good background, but the right decision always depends on your situation: loan amount, property type, current maturity, plans for the coming years. What's true for a renewal isn't necessarily true for a first purchase.
If you want us to look at your file in light of this context, I'd be happy to — no pressure, just so you can make an informed decision.
Chantal Chevalier, Mortgage Broker | Team Leader, Groupe Orbis
Article written on August 18, 2026. Rates and forecasts evolve regularly — the figures cited reflect data available on this date and should be revalidated before any decision.