As interest rates climb, variable-rate mortgage holders are paying thousands of dollars in added interest compared to people with fixed rates.

A new report from RATESDOTCA found someone taking a five-year insured $500,000 variable-rate mortgage in the low-interest days of 2021 would be paying $23,579 more in cumulative interests by September 2023 compared to a fixed-rate mortgage option.

The figure represents 63 per cent in added interest compared to fixed rates, while mortgage payments in this scenario climbed nearly $1,000 per month.

Fixed-rate mortgages had been the norm in Canada for years, but as of July 2022, variable-rate mortgages represented 57 per cent of total mortgage quotes in Canada, according to RATESDOTCA.

“Variable-rate mortgages only surged in popularity when interest rates were rock-bottom during the pandemic,” Victor Tran, RATESDOTCA mortgage and real estate expert, said in the report.


Even with the added costs, Tran believes variable-rate mortgages are still an attractive option, especially as it appears interest rate hikes could be paused for some time. 

“For some, the benefits of variable rates, such as potential lower penalties compared to fixed, and the potential to gain from future rate decreases will be attractive,” he said.

“Others will prefer having a fixed-rate mortgage for payment stability and financial planning.”