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Variable rates, also known as 'floating' rates, are interest rates which fluctuate throughout the term of a mortgage. There are many advantages to choosing a variable rate over a fixed rate, but it's important to consider whether a variable rate will complement your lifestyle and goals. Variable rates tend to be offered at a lesser interest rate, but keep in mind they may be a riskier alternative.
Why Do These Rates Vary?
Variable rates fluctuate in line with the state of the economy and the Bank of Canada's overnight rate (policy interest rate). The Bank of Canada analyzes the economy, inflation, and other factors to set a policy interest rate, which then influences the prime rate that banks use to base their variable rate mortgages off of.
When the economy faces inflation, the Bank of Canada may increase the policy interest rate to compensate. Vice-versa happens when the economy strengthens and inflation is pulled down — the Bank of Canada may lower the policy interest rate. These shifts help keep inflation from rising above the target, ideally keeping the economy stable.
Variable Rates and Inflation
When inflation rises quickly, the Bank of Canada often responds by raising the policy rate, which trickles down to raise variable rate mortgages.
When variable rates are high:
These factors contribute to a slower economy, thus slowing inflation.
When variable rates are low:
These factors contribute to a growing economy, thus increasing inflation.
The Considerations of Variable Rates
Variable rates aren't for everyone:
Generally, rates don't fluctuate by a significant amount during normal conditions; larger movements tend to happen during momentous inflation or recession.
The Benefits of Variable Rates
How Do I Know If a Variable Rate Is Right for Me?
There are many factors which may influence your decision:
Note: Variable rates also impact HELOC balances. Any balance you pull from a Home Equity Line of Credit will commonly be charged interest at a variable rate.
For a no-obligation chat about variable rates and your mortgage goals, reach out for a call!
The information provided on this page is for educational purposes and should not be implicitly relied upon. Conditions may apply and information may not be 100% up to date. Contact a licensed mortgage professional for the most current conditions and program offerings.
Have questions about variable rate mortgages: how they work, benefits & risks?
Call for a free, no-obligation consultation, or run the numbers first with the mortgage calculators.
(604) 780-5173About the author
Kyle Benzies, Licensed Mortgage Broker
I'm a licensed mortgage broker serving clients across British Columbia, Alberta, and Ontario. I work with a network of over 100 lenders — banks, credit unions, monoline, and alternative lenders — to find financing that fits each client's situation rather than a single institution's product shelf. Everything I publish here is written to explain how Canadian mortgage lending actually works, in plain language.
Published November 24, 2025
