Switching Between Fixed and Variable Rates

Why Switching from Variable to Fixed Is a Strategic Decision—Not a Reaction

When interest rates start rising, many variable-rate mortgage holders wonder if they should “lock in” to a fixed rate. The impulse to switch often stems from fear of future increases. But this decision is not just about rates—it’s about how the move aligns with your broader financial plan.

Switching can provide peace of mind and payment stability. But it can also mean accepting a higher rate for the remainder of your term, potentially increasing your borrowing costs unnecessarily.

At Optimize, we help you assess whether switching is a strategic adjustment or an emotional reaction.

How switching works: the mechanics

Most variable-rate mortgages in Canada offer a “conversion” option, allowing you to switch to a fixed-rate mortgage with the same lender without breaking your mortgage.

Conversion Feature	What It Means
Timing	You can convert at any time during your current term
Rate Offered	Based on the lender’s current fixed rate for your remaining term
Term Length	You don’t extend the term — it remains the same duration
Penalty	Usually none, unlike a full refinance or early mortgage break
Rate Competitiveness	The fixed rate may be higher than offers available from other lenders

Tip: Just because your lender allows a switch doesn’t mean it’s your best option. Ask what the conversion rate is, then compare it to refinancing opportunities or staying variable.

When Switching Might Make Sense

Switching from variable to fixed could be appropriate when:

You’re uncomfortable with further payment increases and value stability.
The fixed rate now offered aligns with your financial comfort, even if higher than your current variable rate.
Economic indicators suggest significant further rate hikes.
You have long-term plans to stay in the home and prefer payment predictability.

It’s not about “winning” a rate bet—it’s about managing financial stress and ensuring your mortgage aligns with your lifestyle.

Potential Drawbacks of Switching

Before switching, consider:

You could lock into a higher rate than you’d pay if rates stabilize or decrease.
Lender-offered fixed rates at conversion may not be the most competitive in the market.
You lose the flexibility of lower payments if rates decline again.

Important: Many borrowers switch mid-term without realizing that their new fixed rate may be based on inflated in-house pricing. Always benchmark against outside lenders to understand what you might be giving up.

At Optimize, we model both scenarios—staying variable vs. switching to fixed—showing you the real impact on your cash flow and total interest paid.

Factors to Evaluate Before Making the Switch

How much rate movement can your budget tolerate?
Is the remaining term long enough to benefit from locking in?
How competitive is the conversion rate compared to external refinance options?
Are you switching for strategic reasons—or to relieve anxiety in the short term?

We help you answer these questions objectively, ensuring your choice serves your long-term goals.

How Optimize Guides Your Decision to Switch

Our role is to bring clarity, not push you toward a particular choice. We:

Provide stress-tested scenarios for both staying variable and switching.
Help you understand the timing implications of mid-term switching.
Evaluate whether a refinance (with penalty) to a lower-rate fixed mortgage elsewhere could be a better option.
Align this decision with your broader cash flow, investment, and risk management strategy.

Your mortgage should support your life—not dictate it. Optimize ensures your decision to switch (or stay) is fully informed and deliberate.