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A fixed-rate mortgage locks in one interest rate for the entire term, so the principal-and-interest portion of the payment stays identical from the first payment to the last. In Canada, fixed mortgage rates are conventionally compounded semi-annually, not in advance.
The rate is fixed only for the mortgage term — typically one to five years in Canada — not for the full amortization period. When the term ends, the borrower renews at whatever rate is available then, fixed or variable.
The trade-off for that certainty is usually a higher starting rate than a comparable variable-rate mortgage, and less flexibility to exit early: breaking a fixed-rate mortgage before the term ends typically means paying whichever is greater of three months’ interest or the interest rate differential (IRD).
Semi-annual compounding: Canadian fixed mortgage rates are compounded semi-annually, not in advance, under section 6 of the Interest Act — a structural difference from how many other countries quote mortgage rates.
Same stress test either way: fixed-rate borrowers still qualify at the minimum qualifying rate — the greater of the contract rate plus 2 percentage points or 5.25% — not the fixed rate itself.
Renewal wave context: with roughly 60% of all outstanding Canadian mortgages renewing by the end of 2026, a large share of fixed-rate borrowers are actively comparing fixed vs. variable at their next renewal.
Breaking early costs more: exiting a fixed-rate mortgage before maturity generally triggers whichever penalty is larger — three months’ interest or the IRD — unlike an open mortgage.
Definitions reflect Canadian federal and provincial rules as of the “Updated” date above. Not advice for any specific file.
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