Fixed vs Variable Mortgage in Burnaby: Which Fits in 2026

Almost every buyer I sit down with asks the same question: fixed or variable? I don't have a magic answer, and anyone who claims to know exactly where rates are headed is guessing. What I can do is walk you through how each option actually works, where the real risk sits, and how I'd think about it if I were in your shoes.

Where rates sit right now

The Bank of Canada held its policy rate at 2.25% on July 15, 2026, the sixth straight hold. That kept the prime rate most Canadian lenders use at 4.45%. I'm writing this at the end of July 2026, so treat every number below as a snapshot, not a promise. Rates move daily and may have shifted by the time you read this.

Right now, five-year variable rates have been sitting a bit below five-year fixed rates, roughly in the high 3% range for variable versus high 3% to low 4% for fixed on well-qualified, insured mortgages. That gap is narrower than it was during the high-rate years of 2022 to 2024, which changes the math on which option makes sense. A narrow spread means you're paying less to buy the certainty of a fixed rate than you would have a couple of years ago.

I am not a mortgage broker, and I won't quote you a rate here that could be stale by the time you call your lender. Talk to a broker or your bank for the number that applies to your file today. What I want to help with is the decision framework, because that part doesn't expire.

How fixed actually works

A fixed-rate mortgage locks your interest rate for the term, usually five years in Canada. Your payment doesn't move, and your amortization schedule doesn't move. If the Bank of Canada raises rates next year, you're unaffected until renewal.

The trade-off is the penalty if you break the mortgage early. Most lenders charge the greater of three months' interest or the Interest Rate Differential (IRD), which compares your current rate to what the lender could get today on a similar term for your remaining time. When rates have fallen since you signed, as they generally have through 2025 and into 2026, the IRD can run into tens of thousands of dollars on an average Burnaby mortgage. This is the part people underestimate. If there's any real chance you'll sell, refinance, or break the mortgage before the term ends, ask your lender to run the actual IRD scenario before you sign, not after.

How variable actually works

A variable-rate mortgage moves with the lender's prime rate, which tracks the Bank of Canada's policy rate. Most Canadian variable mortgages today are fixed-payment: your monthly payment stays the same, but the split between interest and principal shifts as prime moves. If prime rises sharply enough, your payment can be adjusted upward, or you can hit what's called a trigger point, where the payment no longer covers the interest owed. That's rare outside the kind of rapid hikes we saw in 2022, but it's a real mechanic, not an abstract worst case.

The upside of variable is the penalty. Breaking it early almost always costs three months' interest, full stop, no IRD calculation. For a buyer who knows there's a real chance of an early sale, that difference alone can be worth thousands of dollars.

An illustrative comparison, not a quote

Say you're financing $700,000, a realistic size for a Burnaby townhome purchase, over a 25-year amortization. Using a fixed rate around 4% versus a variable rate around 3.6%, roughly a 0.4-point gap, the difference in monthly payment works out to somewhere in the neighbourhood of $150 to $170 a month, with variable lower.

That's a rough illustration using round numbers, not a quote and not advice specific to your file. Your actual rate depends on your credit, down payment, insured versus conventional status, and lender. Run your own numbers on the mortgage calculator with the real rate your broker gives you.

How I'd think about the choice

I don't tell buyers which one to pick, because the right answer depends on things I can't see from a spreadsheet: how stable your income is, how much of a payment jump you could absorb without stress, and how likely you are to move again in the next five years.

Three questions I ask every buyer. How would a payment increase hit your budget? If a few hundred extra dollars a month wouldn't strain you, variable's lower penalty carries less risk. If it would mean cutting into savings, fixed's certainty is worth more than the rate gap. How likely are you to break the mortgage early? Buyers staying five-plus years lean toward fixed. Buyers who might upsize, relocate, or are treating this as a starter home should weight the IRD math heavily, since it can wipe out a rate advantage several times over. And do you want to actively manage the decision, or set it and forget it? Variable means watching Bank of Canada announcements eight times a year; fixed means you decide once.

If you're weighing this while shopping in a specific Burnaby pocket, say Metrotown where condo and townhome financing amounts vary a lot by building age and strata fees, the mortgage decision and the property decision need to happen together, not in sequence.

Key Takeaways

• The Bank of Canada held its policy rate at 2.25% on July 15, 2026, its sixth straight hold, keeping prime around 4.45%.
• Fixed rates lock your payment for the term but carry IRD penalty risk if broken early in a falling-rate environment.
• Variable rates move with prime but usually cost only three months' interest to break, a smaller, more predictable penalty.
• The fixed-versus-variable rate gap has narrowed compared to 2022 to 2024, which changes the risk-reward math.
• Neither option is universally right. Base the choice on your income stability, your odds of an early sale, and how closely you want to track rate announcements.

Frequently Asked Questions

Is a variable-rate mortgage riskier than a fixed rate right now?

It carries a different kind of risk, not necessarily more. Variable payments can rise if the Bank of Canada raises rates, but the penalty for breaking a variable mortgage early is far smaller and more predictable than a fixed mortgage's IRD penalty. Which one is riskier for you depends on whether you're more worried about payment changes or about being locked in.

What is an Interest Rate Differential (IRD) penalty?

It's the penalty most lenders charge for breaking a fixed-rate mortgage before the term ends, calculated as the greater of three months' interest or the difference between your contract rate and the lender's current rate for a similar remaining term. When rates have fallen since you signed, the IRD can run into tens of thousands of dollars. Ask your lender to calculate it for your specific mortgage before assuming what it will cost.

Should I choose variable because rates might fall further?

I won't tell you to bet on that, because nobody can guarantee where the Bank of Canada goes next. Rate direction should be one input, not the whole decision. Your income stability, how likely you are to break the mortgage early, and your comfort with payment changes matter just as much.

Can I switch from variable to fixed partway through my term?

Most Canadian lenders let you convert a variable mortgage to a fixed rate during the term, usually without the three-month interest penalty, though the fixed rate you get is whatever the lender is offering that day, not one you locked in earlier. Ask about the lender's specific conversion policy before you sign.

Sources

• Bank of Canada: Policy Interest Rate: 2.25% target, held July 15, 2026 (sixth consecutive hold).
• Bank of Canada: Bank of Canada maintains the policy rate at 2¼%, July 15, 2026: official rate announcement.
• Ratehub.ca: Best 5-Year Fixed Mortgage Rates and Best 5-Year Variable Mortgage Rates: illustrative rate ranges, checked late July 2026 and subject to daily change.

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The fixed-versus-variable call is personal, and I'd rather walk through your actual numbers than have you guess from a blog post. If you're getting ready to buy or sell in Burnaby, let's talk through your financing alongside your property search so the two decisions work together.

Start with a no-obligation valuation if you're selling to buy, or reach out directly to set up a chat. You can also call or text me at 778-991-0051.

Jersey Li, The Apartment Guy® · Medallion Club Member (Top 10% REALTOR®, 2024 & 2025) · Jersey Li Personal Real Estate Corporation, Sutton Group - 1st West Realty.