How Canadians Should Think About Choosing and Switching Mortgages

Key Takeaways

• Fixed = certainty, adjustable = flexibility: Fixed rates lock your payment for the term and protect against rising rates; adjustable rates often start a bit lower (commonly a small spread, e.g., ~10–20 bps) but carry more interest‑rate risk — rates and spreads are subject to change.
• In‑place conversions are possible but not guaranteed: Many lenders allow borrowers to convert an adjustable rate to a fixed rate with the same lender, but availability, timing and fees depend on the mortgage contract and lender rules — confirm before assuming you can switch penalty‑free.
• Exit costs differ materially: Breaking an adjustable mortgage is often limited to a few months’ interest if you leave the lender, whereas breaking a fixed mortgage can trigger an interest rate differential (IRD) calculation that may be substantially higher; exact penalties vary by product and lender.
• Adjustable rates still make sense in some situations: They can be a good fit if you expect to sell or refinance within a short horizon (commonly around 2 years) or if you plan aggressive prepayments and value lower initial interest rates and easier exit options.
• Don’t decide on headline rates alone — run scenarios with a broker: Use rate comparison tools as a starting point, then ask your licensed mortgage broker to model fixed vs adjustable outcomes, confirm current pricing, and explain product rules; Marathon Mortgage products are available through licensed mortgage brokers.

Choosing between an adjustable-rate mortgage and a fixed-rate mortgage is one of the most important financial decisions a homeowner makes, as it shapes monthly payments, affordability, and long-term interest costs.

The choice is not just about today’s advertised rate; it is about how comfortable you are with future rate movement, how long you plan to keep the property, and whether you may need flexibility to sell, refinance or make large prepayments. Over the past year, many mortgage advisers who previously favoured adjustable products have shifted toward recommending 3- or 5-year fixed terms for a growing number of borrowers, as the certainty of a fixed payment can reduce the risk of payment shock when rates rise.

That said, adjustable products remain useful tools for the right circumstances, and the best decision requires weighing stability, cost and flexibility together — ideally with input from a licensed mortgage broker who can apply current pricing and product rules to your situation.

Market snapshot: recent moves and the current spread

Market conditions have changed significantly in recent months, which is why the conversation about term selection has shifted. There was a sustained period when adjustable pricing dropped, and many borrowers capitalized on lower short-term costs. However, fixed-term pricing has become more attractive to advisers recently because it locks in certainty for several years.

Industry observers often quote a narrow spread between typical adjustable pricing and posted fixed pricing, with market participants currently referencing spreads of around 10 to 20 basis points, where adjustable pricing sits below comparable posted fixed pricing.

While that difference can matter for monthly payments, it is only one piece of the decision—because a seemingly small spread today can be overwhelmed by larger differences in future fixed pricing, prepayment options, or break penalties when it comes time to renew or switch. Because these spreads and lender offerings change frequently, treat any specific spread as illustrative and confirm current numbers with your broker or lender.

Switching from adjustable to fixed: realities and common misconceptions

Many borrowers are surprised to learn that it is often possible to convert an adjustable‑rate mortgage to a fixed‑rate product with the same lender without triggering the full “break” penalty that would apply if you moved to another lender, but this depends entirely on the lender’s product rules and the wording of your mortgage contract. The practical implication is that adjustable products can offer in-place flexibility, making them less risky than they first appear. Still, you must confirm the mechanics and any fees before choosing that route.

A common misconception is that you can always switch into whatever lower fixed rate appears in the market later on; in reality, lenders usually offer their current posted fixed rate or renewal pricing at conversion or renewal — not necessarily the lowest special rate that may have been available at an earlier date.

Another misconception is about costs: breaking an adjustable mortgage to go to another lender is often limited to a few months’ interest, whereas breaking a fixed mortgage can require an interest rate differential (IRD) calculation that may be significantly larger. Exact switch options and penalties vary across lenders and products, so do not assume flexibility or low cost without written confirmation from your broker.

Risks of adjustable rates and how to weigh them

Choosing an adjustable‑rate product exposes you to interest‑rate risk because changes in the reference rate can increase the interest portion of your payments and, depending on how the product handles payment adjustments, may raise your monthly payment. Even when adjustable pricing is currently lower, you should consider the scenario where fixed rates rise and the fixed pricing you’re eventually offered is higher than the rate you could have locked in earlier.

Adjustable products commonly have lower exit penalties, which can be valuable if you expect to sell or refinance in the near term; however, that lower early‑exit cost must be balanced against the possibility of higher total interest over time if rates trend upward. Other practical risks include product rule changes, disappearing discounts, or lender policy shifts that can alter the economics after you sign, which is why reviewing the mortgage contract and asking your broker to model stress scenarios is essential.

When an adjustable rate can still make sense

An adjustable‑rate mortgage remains a sensible choice for many borrowers when the circumstances align with the product’s strengths. If you plan to sell or refinance within a relatively short timeframe—typically around two years—the lower initial cost and smaller typical exit penalties of an adjustable product can make it a more economical choice, despite the rate uncertainty.

Adjustable products also suit borrowers who plan to make large, regular prepayments or lump-sum payments, as the combination of lower initial interest and flexible prepayment options can significantly reduce the outstanding balance more quickly than a fixed product with stricter prepayment limits. Borrowers who favour short‑term savings and are comfortable staying closely engaged with a broker to revisit strategy as markets change can also benefit from adjustable pricing. These are broad illustrations and not advice; the right decision depends on your cash flow, plans for the property and comfort with rate volatility.

Rate comparisons and resources: how to use them wisely

Comparing headline rates is a useful first step, but it is not sufficient on its own. The numerical gap between adjustable and posted fixed rates—while often small in percentage points—should be considered alongside the product’s prepayment rights, portability, conversion options and the method your lender uses to calculate break penalties.

Online rate aggregators and market resources can give you a snapshot of what lenders are publicly offering; some industry participants reference sites such as Wowa.ca for current pricing, but any advertised or third‑party rate needs to be validated through a broker or direct lender channel because advertised rates can carry conditions or limited availability. Always ask your broker to confirm eligibility, the exact product code and whether any special pricing is subject to limited volumes or timelines. Treat rate comparison tools as conversation starters rather than deal closers.

How a licensed mortgage broker helps — and where Marathon Mortgage

A licensed mortgage broker brings practical value because they can pull current lender pricing, explain product rules and model how different scenarios affect your payments today and over time. Brokers are trained to check lender‑specific conversion options, portability clauses, prepayment privileges and how penalties are calculated, and they can compare both posted and negotiated pricing across multiple lenders so you get a clear picture of trade‑offs.

Marathon Mortgage supports broker partners with underwriting expertise, broker tools and product options designed for different borrower needs. If you’re exploring mortgage options, speak with your licensed mortgage broker. They can assess your needs and determine whether Marathon Mortgage products are a fit.

Risks, considerations and practical next steps

Don’t make a choice based solely on today’s lowest headline number; take time to understand what could happen in different rate environments and how that would affect your payments and break costs. Before you sign, ask your broker for written confirmation regarding conversion options, portability, prepayment allowances, and exact penalty calculations for both adjustable and fixed products you are considering. Run simple “what‑if” scenarios—what happens if rates rise 1% or fall 1%—to see the impact on payment amounts and total interest.

Use online aggregators to gather initial options, but rely on your broker to verify availability, eligibility and any conditional pricing. If you’re unsure about a claim on a comparison site or about how a lender calculates IRD or other penalties, flag it and get the explanation in writing. These steps will reduce surprises at renewal or when your circumstances change.