Family and friends have been requesting this article. In a rate environment that continues to increase, as evident through the last several Bank of Canada Meetings, we are due for a conversation on the topic of: variable vs. fixed rate mortgages. With Bank of Canada's next Meeting scheduled for Wednesday, October 26, 2022, we are due for a conversation on Variable vs. Fixed.
In everyday terms, a variable mortgage can be described as mortgage rate tied to the Bank of Canada Prime Rate. People on variable mortgages will see their rate be described as Prime +/- their Mortgage Rate. So each time the Bank of Canada has a Meeting discussing Prime Rate and the decision to increase or decrease it, this impacts borrowers as their rates also increase or decrease based on the Bank of Canada Prime Rate.
A fixed-rate mortgage can be described as a Mortgage Rate that does not change according to what is happening with the Prime Rate. This means if that your Mortgage Rate is shown on your Mortgage Agreement as 2.99%, your rate will remain 2.99% until the end of your term (up to the maturity date of your mortgage).
There is a simplified breakdown on the definition of Variable and Fixed Rate Mortgages. Here is article one in a series of articles on mortgages. If there are special requests regarding Variable vs. Fixed Rate Mortgages, let me know in the comments below. Signed, Filipina Budget Girl.