Rising Bond Yields Widen Gap Between Fixed and Variable Mortgage Rates in Canada
With more than one million Canadian households facing mortgage renewals this year, rising bond yields have pushed fixed rates significantly above variable options. Inquiries for variable-rate mortgages have surged, though most borrowers still prefer the budget certainty of fixed terms.
Canada is experiencing a wave of mortgage renewals, with more than one million households either renewing or close to renewing their mortgages this year. Rising government bond yields are reshaping the choices these borrowers face.
On Thursday, Canada's 10-year government bond yield hit 3.85 per cent, while the five-year yield reached 3.55 per cent. As of that same day, the lowest available rate for a five-year fixed-rate mortgage was 4.34 per cent, compared to 3.43 per cent for the lowest variable rate mortgage. This leaves a gap of almost an entire percentage point between fixed and variable rates, making variable options more attractive for reducing monthly costs.
Data reflects a significant shift in borrower interest towards variable-rate mortgages. Inquiries for variable-rate mortgages accounted for 36 per cent of all inquiries on RateHub between January and September, up from 10 per cent during the same period in 2025. Despite this surge, fixed rates remain preferred by most borrowers for budget certainty, even at higher costs.
Borrowers weighing their options should note that most lenders allow converting a variable mortgage to a fixed rate during the term without a prepayment penalty, but the conversion applies at the lender's current available fixed rate. There is also the potential for higher monthly payments if interest rates rise during a variable mortgage term.
Jamie David, vice president of mortgages at RateHub, suggests that shorter-term fixed mortgages of two or three years can offer a compromise for those wanting payment certainty without committing to five-year terms.
Market volatility is expected to continue based on global uncertainty and government debt levels, adding further complexity to renewal decisions across the country.