Switching From Variable to Fixed Mid-Term — When It's Worth the Math
Should I lock in my variable mortgage to fixed (Canada 2026)?
As of November 5, 2026, the 5-year variable street rate is 3.74% and the tracked 5-year fixed is 4.49%, 0.75 points above the variable. The 3-year fixed is 4.59%, 0.85 points above the variable. A 0.25-point prime move changes the variable payment by about $13 a month per $100,000 on a 25-year amortization. Lock in when the budget cannot absorb a rise, or you are near the trigger rate. A variable-to-fixed conversion is usually penalty-free, and the new rate is the lender's posted or offered fixed rate. On October 28, 2026 the Bank of Canada raised the policy rate by 25 basis points to 2.50%, with the Bank Rate at 2.75% and the deposit rate at 2.45%. Big-bank prime is 4.70% effective October 29, 2026 (overnight plus 2.20), unless a fresher bank prime print disagrees. The next scheduled decision is December 9, 2026.
Verified
Canadian variable-rate mortgages typically include a free conversion to a fixed of equal or greater remaining term — but the fixed rate your lender offers at conversion is usually 20-50 bps above their best market rate for new files, because they have you locked in with limited leverage. The real question isn't whether to convert but whether the absolute rate offered beats riding the variable for your remaining term.
Who this is for
Borrowers currently on a variable-rate mortgage, watching rates and trying to decide whether to convert or hold.
- Illustrated variable rate
- 3.95% if the discount is prime minus 0.75 at the November 3, 2026 prime of 4.70% — confirm the discount
- Conversion fixed offer
- 4.60% for 3 years
- Bank's best 3-yr fixed for new files
- Read the 3-year on the live card. On November 3, 2026 the best tracked 3-year was 4.59% (https://ratellow.com/api/rates). A conversion offer is often worse than a new file.
- Break-even BoC cuts to ride variable
- In this illustration the variable (3.95%) is already below the 4.60% conversion offer. Confirm the actual discount before deciding.
Framework
What the conversion clause actually gives you
Most variable products include a right to convert to a fixed term of equal or greater length remaining. 'Equal or greater' matters — if you have 3 years left on variable, you can convert to 3-year, 4-year, or 5-year fixed, but not a shorter 2-year. The rate is whatever the lender's posted discounted fixed is on conversion day, with your specific discount dependent on lender policy.
Why the conversion rate is usually not best-market
On a new-file application, the lender competes with every other lender. On a conversion, they compete with — themselves, because breaking the mortgage to switch lenders is expensive on a variable too. Most lenders price conversions 20-50 bps above their sharpest new-file rate. You can sometimes negotiate by mentioning you've shopped a discharge and a switch (even if expensive), but leverage is limited.
Key considerations
- Converting to a fixed resets your prepayment privileges to the fixed product's rules — usually still 15-20% annual, but verify.
- The fixed rate you're offered at conversion is NOT held in advance — it's the rate on the day you call and instruct conversion.
- If you're planning to move, refinance, or sell within 18 months, staying variable is usually better — fixed break costs (IRD) are far worse than variable break costs (3 months interest).
- A 3-month interest penalty on variable is typically $3-6k on a $500k balance; IRD on a fixed can be $15-40k.
Common mistakes
- Converting because 'rates might go up' without comparing the offered fixed rate to current market. If the lender's offer is 50 bps above market, you're paying for insurance at an above-market price.
- Assuming any fixed is safer than variable. A high-rate fixed locks in a high cost for the full remaining term.
- Ignoring the break-cost difference. Variable stays flexible; fixed introduces serious IRD exposure if life changes.
Action steps
- 01Call your lender and get the specific conversion rate in writing. Note the term and the date.
- 02Get a 3-year fixed quote from a broker for a new file, just for comparison. If your lender's offer is within 15 bps, converting is fine. More than 25 bps off — push back.
- 03Decide based on the absolute rate, not 'fixed vs variable' philosophy. A 4.60% fixed versus a variable at prime minus 0.75% (3.95% at the November 3, 2026 prime of 4.70%, if that discount is yours) is a spread question. In that illustration the variable is already cheaper. Conversion is a purchase of certainty, not a bet on cuts.