Fixed vs. Variable Mortgage in Alberta — Which Is Better?
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·Reviewed by a mortgage professional
Short answer
A fixed rate locks your interest rate for the term — predictable payments. A variable rate moves with the lender's prime rate — often lower at signing but can rise or fall over time. Neither is universally better; it depends on your budget cushion and how long you expect to hold the mortgage.
The plain-English version
Fixed-rate mortgages give payment certainty. If rates rise during your term, your rate and payment (on a standard fixed product) stay the same until renewal.
Variable-rate mortgages typically start below comparable fixed rates. Your payment may stay level while more or less goes to interest as prime moves, or your payment may adjust — product design varies by lender.
Alberta-specific considerations
- Alberta buyers face the same federal stress test whether they choose fixed or variable — lenders qualify you at the higher of contract rate + 2% or the benchmark rate.
- Energy-sector income volatility can make payment certainty more important for some Alberta households — that is a personal cash-flow decision, not a regional rule.
- At renewal, you can switch between fixed and variable with any lender — shop both sides of the market.
Example scenario
A buyer choosing between 5.49% fixed and 5.09% variable on a $400,000 mortgage might save roughly $80/month initially on variable — but if prime rises 1%, that advantage can disappear. Run both scenarios in the payment calculator with different rates.
Common mistakes to avoid
- Choosing variable solely for the lowest payment without a plan if rates rise.
- Assuming you can break a fixed mortgage penalty-free — fixed penalties can be substantial mid-term.
- Ignoring product details — some variables trigger payment changes, others keep payments level and extend amortization.