Fixed vs. Variable Interest: How to Choose the Right Mortgage Mix

What is the difference, really

A fixed-rate track locks the rate for the entire term - the monthly payment is known in advance and does not change, even if market rates rise or fall. A variable-rate track (for example prime, or variable every 5 years) is updated according to market conditions, so the payment can rise or fall over time.

Usually, the starting rate on a variable track is lower than on a comparable fixed track - this is the price the bank "pays" you for taking on the future uncertainty yourself.

The first question: how important is stability to you

If the monthly payment is already close to the ceiling of what is comfortable for you, a future rise in the rate on a variable track can create real cash-flow pressure. In such a case, the value of a fixed track's stability is higher even if it is more expensive at the start.

On the other hand, if you have breathing room in your monthly cash flow, a variable track can save real money - especially if you plan to finish repaying this mortgage relatively quickly (for example through a future refinance or early repayment).

The second question: what is your time horizon

A variable track every 5 years exposes you to a rate update only at defined points in time. If you expect to sell the property or refinance the mortgage before the first update point, much of the track's risk is simply not relevant to you.

Why most mixes combine several tracks

In practice, most mortgage advisors do not recommend a single track for the entire amount, but a combination: part fixed for security, part variable or prime for flexibility and a lower cost. The right ratio between the parts depends on the size of the monthly payment relative to income, the age of the borrowers, and their financial goals going forward.

The question "how much fixed and how much variable" cannot be answered without looking at the entire financial picture - which is exactly the work a mortgage advisor does with every file.