Fixed or variable mortgages in a time of interest hikes

Tracy Head • October 24, 2022

Last weekend I attended the mortgage professionals conference in Vancouver. My goal was to take in as many professional development sessions as possible because I’m finding we are moving forward in a very strange interest rate environment.

Ironically, and I never thought I’d ever say this, the session I got the most from (and arguably enjoyed the most) was the presentation by Benjamin Tal. Tal is the managing director and deputy chief economist at CIBC Capital Markets Inc.


He spoke about his thoughts on our current rate environment, the forces driving the Bank of Canada’s economic policies, and where he felt rates will go.


He also spoke about the unprecedented rate hikes we’ve seen this year. The Bank of Canada is trying desperately to curb inflation and he thought the bank has gone too far and has overreached with the rate hikes this year.


I am a fan of variable rate mortgages. One of the key factors that influences this is the cost of breaking your mortgage early. If you need to pay your mortgage in full and it doesn’t make sense (or doesn’t work) to port your current mortgage, the maximum penalty you will be charged is three months’ interest.


With a fixed mortgage, the penalty to break your mortgage is normally the greater of either the interest rate differential (IRD) or three months’ interest. Investopedia.ca shows how an IRD penalty is calculated:


“An IRD weighs the contrast in interest rates between two similar interest-bearing assets. Most often it is the difference between two interest rates.”


This type of penalty can be substantial. I’m currently working with a client who is selling a luxury property whose current mortgage is up for renewal. It is a sizeable mortgage and he is understandably concerned about the volatility of mortgage interest rates right now.


I did the math for him. Had he locked into a five-year fixed-rate mortgage, based on where rates are now and the balance of his mortgage, his penalty was in the range of $32,000. The variable rate penalty, again based on today’s balance and rate, would be around $6,000. So for this particular client who is absolutely going to be selling his home in the next year the potential increase in payment due to rising rates was a far more palatable option than a penalty in the $32,000 range.


All this aside, for many Canadians in variable mortgages the incredible rate hikes we’ve seen this year make a massive dent in their monthly budget. It’s really tempting to think about locking into a fixed rate product for the stability of the payment.


One consideration is how you will feel if you lock into a rate in the mid to high five per cent range when rates start to move down again. Will you sleep better at night knowing you have the security of a fixed payment? Are you losing sleep thinking about where rates are going?


I recommend you think about why you chose variable in the first place. You likely enjoyed really low rates for the first part of your term and will very likely enjoy lower rates towards the end of your term as rates start to trend down again.


I guess I should have started with that. Tal’s take is that we are in for another significant rate hike very soon but he feels rates will stabilize next year and start trending down again towards the end of next year or early 2024.


One option is splitting the difference. There are lenders who offer true variable mortgages with a static payment. This means that regardless of where rates move your payment stays the same. I should say, it stays the same until the increase in rate means you aren’t paying enough to cover the interest due which in turn will affect your amortization.


You would have to pay a three-month interest penalty to break your current mortgage to switch to a lender that offers a static payment. Most lenders will allow you to capitalize up to $3,000 of your penalty into your new mortgage (more if you do a refinance instead of a straight switch, providing you have enough equity for this to work).


Going this route you will still enjoy the benefit of a variable rate mortgage once rates start moving down again, without worrying about potential penalties if you have to pay out your mortgage unexpectedly.


If you’d like to chat about this, and see if it’s a fit for you, I am happy to do a mortgage check-up and offer some insight.

Tracy Head

Mortgage Broker

GET STARTED

Importance of a PreApproval

By Tracy Head • May 16, 2026
There’s a moment I see all the time in this business. A buyer walks into an open house “just to look,” falls completely in love with the place, and by supper time they’re talking about writing an offer. It’s exciting. It’s emotional. And sometimes, it’s exactly where people get themselves into trouble. I can tell you one of the smartest things a buyer can do before house hunting is get a proper mortgage pre-approval in place. Not the casual “I think we qualify for around this amount” conversation. I mean an actual reviewed pre-approval with income, down payment, credit, and monthly budget all looked at carefully. Because once you’re standing in someone else’s dream kitchen imagining where your coffee maker will go, logic has a funny way of leaving the building. A pre-approval does a few very important things. First, it tells you what a lender is likely willing to lend you. That sounds obvious, but many buyers are shocked to discover that what they want to spend and what the bank is comfortable approving are two very different numbers. Second, it helps you shop with confidence. In competitive markets, sellers take pre-approved buyers much more seriously. A seller who has two similar offers in front of them will almost always feel more comfortable with the buyer who already has financing lined up. But here’s the part I think matters even more — a pre-approval gives you the chance to figure out what home ownership will actually feel like every month. And this is where many people make a mistake. They focus only on the mortgage payment. The mortgage payment is important, of course, but it’s only one piece of the puzzle. Before writing an offer, buyers should sit down and calculate the total monthly cost of the home. That means including: Mortgage payment Property taxes City utilities Home insurance Strata fees, if applicable Heating costs Potential maintenance expenses Because the difference between “technically approved” and “comfortably affordable” can be huge. Let’s use a simple example. Suppose you purchase a home for $650,000 with a reasonable down payment. At current interest rates, your mortgage payment might land somewhere around $3,100 per month. At first glance, that may seem manageable. But then we add: Property taxes: $350/month Utilities: $200/month Home insurance: $140/month Strata fees: $450/month Suddenly the true monthly housing cost is closer to $4,240 per month. That’s a very different conversation. And if you haven’t done those calculations ahead of time, you may find yourself house-rich and lifestyle-poor after possession day. I often tell clients this: your home should support your life, not consume it. You still want room for groceries, kids’ sports, travel, retirement savings, and the occasional dinner out where nobody has to do dishes afterward. Another benefit of getting pre-approved early is discovering issues before they become emergencies. Sometimes we uncover small credit issues, missing documents, or income challenges that can be fixed with a little planning and time. It’s much better to solve those things before you fall in love with a home than three days before financing conditions are due. And please remember — just because a lender says you qualify for a certain amount does not mean you have to spend that much. Some of the happiest homeowners I know bought below their maximum approval and left themselves breathing room financially. Funny enough, those are usually the people sleeping best at night when interest rates rise or life throws a curveball. Buying a home should feel exciting, not terrifying. So before you start measuring living rooms for sectional sofas or debating paint colours, take the time to get a proper pre-approval completed and run the real monthly numbers carefully.  Future-you will be very grateful.

Owning vs. Renting: A Broker’s View from the Front Lines

By Tracy Head • May 4, 2026
After a couple of decades in the Canadian mortgage world, I’ve learned that the “rent vs. buy” debate isn’t really about right or wrong—it’s about timing, lifestyle, and how comfortable you are trading flexibility for long-term wealth building. Let’s walk through both sides with some real numbers, because that’s where the story gets interesting. The Case for Buying: Building Equity (and Stability) Let’s assume you purchase a home for $600,000 CAD with a 20% down payment ($120,000), leaving you with a $480,000 mortgage at a 4% interest rate , amortized over 25 years. Monthly mortgage payment: ≈ $2,530 First-year interest portion: roughly $19,000 First-year principal paydown: roughly $11,000 That principal portion is the quiet hero here. Every payment chips away at your loan and builds equity—essentially forced savings. Fast forward 5 years: You’ve paid down roughly $60,000–$70,000 in principal If the home appreciates at a modest 3% annually , your $600,000 home could be worth about $695,000 Your equity position: Original down payment: $120,000 Principal paid: ~$65,000 Appreciation: ~$95,000 Total equity: ~$280,000 That’s a meaningful wealth position built largely through time and discipline. Other advantages: Predictable housing costs (especially with a fixed rate) Protection against rising rents Freedom to renovate and personalize Leverage: you control a $600K asset with $120K down The Reality Check: The Costs of Ownership Owning isn’t just about the mortgage. On that same $600,000 home, you might also be looking at: Property taxes: $3,000–$4,000/year Maintenance: ~1% annually (~$6,000) Insurance: $1,500–$2,000/year So your true monthly cost isn’t $2,530—it’s closer to $3,200–$3,500 when everything’s factored in. And unlike rent, surprises are your responsibility. Roof leaks don’t call the landlord—they call your bank account. The Case for Renting: Flexibility and Liquidity Let’s say a comparable home rents for $2,500/month . Right away, you’re saving: ~$700–$1,000/month compared to owning (after ownership costs) Now here’s where renters can quietly win— if they’re disciplined . Investing the difference: If you invest $800/month at a conservative 5% annual return : After 5 years: ~$54,000 After 10 years: ~$125,000 Add to that your original $120,000 down payment (which you didn’t tie up in real estate), also invested: $120,000 at 5% over 5 years: ~$153,000 Total investment portfolio after 5 years: ~$207,000 That’s not far off the homeowner’s equity position—and it’s far more liquid. The Trade-Offs: It’s Not Just Math Here’s where the decision gets personal. Buying tends to win when: You plan to stay put for 5+ years You want stability and control You’re comfortable with maintenance and unexpected costs You value long-term wealth building through real estate Renting shines when: Your lifestyle or job requires flexibility You prefer predictable monthly costs You’re disciplined about investing savings You’re wary of market fluctuations or high entry prices A Final Thought from the Broker’s Desk I’ve seen clients build substantial wealth through homeownership—and I’ve seen others feel financially stretched because they bought too soon or too much house. On the flip side, I’ve met renters who quietly built six-figure investment portfolios… and others who simply spent the difference. The truth? Both paths can work beautifully—or poorly—depending on behaviour. If you’re buying, do it with a long-term mindset and a financial cushion.  If you’re renting, treat your savings like a mortgage payment to your future self. Either way, the goal isn’t just having a roof over your head—it’s making sure that roof supports the life you actually want to live.