Fixed vs Variable Rate at Mortgage Renewal in Alberta?
Short answer
Fixed rates give payment certainty for the term; variable rates move with prime and can save money if rates fall but rise if prime increases. At renewal, the choice should match your budget tolerance and timeline — not a guess about where rates are headed.
The plain-English version
A 5-year fixed renewal locks your payment for five years regardless of Bank of Canada moves. A variable renewal typically priced at prime minus a discount changes when prime changes — your payment may stay flat on some products (fixed-payment variable) or adjust (adjustable payment).
Historically, variable has often been cheaper over full cycles, but fixed wins in rising-rate environments. At renewal in 2024–2026, spreads between fixed and variable have narrowed, so the payment difference on the same balance may be smaller than in past years.
Alberta-specific considerations
- Alberta employment can be cyclical in energy sectors — borrowers with less stable income sometimes prefer fixed payments for budgeting.
- Property tax and utility costs in Alberta still rise independently of your mortgage rate — factor total housing cost into the decision.
- Some Alberta credit unions offer competitive variable products; compare both local and national lenders at renewal.
Example scenario
Renewing $340,000 over 20 years: a 5-year fixed at 5.25% is about $2,280/month. A variable at prime minus 0.85% (roughly 5.1% if prime is 5.95%) might start near $2,250/month — about $30 less. If prime rises 0.50%, that variable payment could increase by roughly $85/month on this balance.
Common mistakes to avoid
- Choosing variable solely because it is slightly cheaper today without stress-testing your budget for rate increases.
- Choosing fixed and then breaking early when life plans change, triggering IRD penalties.
- Not comparing the same term length when weighing fixed vs variable.
- Ignoring whether your variable mortgage has a fixed payment or adjustable payment structure.