3-Year Fixed vs 5-Year Fixed vs 5-Year Variable: the 2026 Math for Niagara Borrowers

Where rates stand this week

The Bank of Canada raised its policy rate from 2.25% to 2.50%, which moved prime to 4.70%. Variable mortgages are priced off prime, so the insured 5-year variable benchmark is prime − 1.05, or 3.65%. Fixed rates follow Government of Canada bond yields rather than the overnight rate, and the 5-year fixed currently sits slightly below the 3-year.

Insured 3-yr fixed

4.39%

Insured 5-yr fixed

4.29%

Insured 5-yr variable

3.65%

Prime rate

4.70%

Indicative benchmark rates for qualified borrowers, OAC. Rates change daily and depend on credit, property, amortization and loan size. Big-6 posted 5-year fixed for penalty math: 6.09%. Not a commitment to lend.

All rates are indicative broker benchmarks for the week of November 13, 2026, on approved credit, and change daily. Nobody knows where prime will be in three years; what we can do is measure how much room the variable discount gives you.

The three options side by side

Here is the same $450,000 insured mortgage on a 25-year amortization under each option, with payments calculated on the Canadian semi-annual convention so the comparison is like for like. Interest on the variable line assumes prime stays put for all five years, which is unlikely.

At today's spread the variable saves $155.87 a month against the 5-year fixed and about $13,731 of interest over five years if prime stays put. The 3-year fixed costs a little more than the 5-year now, but it buys a renewal date two years sooner, which is the right trade if you expect fixed rates to be lower in 2029 or you know you will sell or refinance around then.

How far can prime rise before variable loses?

That cushion is real but not unlimited. The Bank has just shown it will move in both directions, so the honest answer is that variable is a bet that the average prime rate over your term will stay below about 5.5%. If a payment increase of $237 a month (the +1.00 scenario) would strain your budget, the bet is not worth it regardless of the expected value.

Break penalties: the part most comparisons skip

Life in Niagara rarely runs on five-year schedules: a move from Welland to Pelham, a separation, a debt-consolidation refinance, a GO-line job that changes everything. A variable mortgage's penalty is almost always three months' interest. A fixed mortgage charges the greater of three months' interest or the interest rate differential (IRD), and the IRD grows when rates fall.

How we got there: the fixed balance after 30 months is $423,341. Three months' interest at 4.29% is $4,540. In the falling-rate case, a monoline comparing 4.29% with a 3.39% current 3-year rate charges 0.90% × $423,341 × 2.5 ≈ $9,525. A big bank using a 4.79% posted 3-year rate minus a 1.80% original discount (6.09% posted − 4.29% contract) compares against 2.99%: 1.30% × $423,341 × 2.5 ≈ $13,759. The variable balance is $421,031, and three months' interest at 3.65% is $3,842, or $2,789 at 2.65%.

Which one fits which Niagara borrower

• 5-year fixed: first-time buyers at the edge of their budget in Welland, Port Colborne or Fort Erie, where certainty matters more than the last dollar. See first-time buyer mortgages.
• 5-year variable: households with room in the budget, a real chance of moving or refinancing before 2031, and the stomach for payment changes. The 3-month penalty is the hidden benefit.
• 3-year fixed: borrowers who want certainty now but expect to sell, add a secondary suite, or consolidate debt around 2029, and those who think fixed rates will be lower by then.
• Renewing in 2026: compare all three at the straight-switch level first; no stress test applies to a same-balance switch. See our renewal guide.

Your choice of tier matters as much as fixed or variable: the same 5-year fixed is 4.29% insured, 4.39% insurable and 4.54% uninsured this week. See insured vs insurable vs uninsured.