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Variable rate mortgage applications jumped 30% overnight after the Bank of Canada’s September rate cut. Everyone’s celebrating like we’re back to the good old days.

I’m not celebrating.

The pandemic taught me something crucial about variable rates that most people haven’t learned yet. Risk versus reward is the only thing that matters when choosing a mortgage rate. And right now, that equation has fundamentally shifted.

Here’s what everyone’s missing: the gap between fixed and variable rates is still very thin. Variable rates sit at 4.00%-4.35% while fixed rates hover at 3.94%-4.24%.

That’s not the 0.50% advantage we have historically seen favouring variable rates. That narrow spread changes the entire game.

When I sit across from clients now, I’m doing something I rarely did before 2020: recommending fixed rates more often. The pandemic showed me what happens when variable rate holders get caught in a rising rate cycle without the financial cushion to absorb the shock.

Too many people are stretched debt-wise. They see the potential rate advantage of additonal rate cuts and think they’re getting a deal.

They’re actually making a bet they can’t afford to lose.

Variable rate holders love talking about their ability to “lock in” to fixed rates when they feel things have bottomed out. It sounds like a safety net.

Here’s the reality: by the time the media announces that fixed rates have gone up, you’ve already missed the boat on the bottom.

I monitor bond yields daily because that’s what drives fixed rates. Not Bank of Canada announcements. Not headlines. Bond markets move fast, and they move first.

Rates can jump 5 to 30 basis points with less than 24 hours notice. I’ve watched clients experience shock and disappointment when they realize their “perfect timing” window slammed shut overnight.

The math is brutal. A 0.25% rate increase costs $15 per month for every $100,000 borrowed. On a $500,000 mortgage, missing that timing window by just a quarter point means $75 more per month, or $4,500 over five years.

That’s not theoretical. That’s real money leaving your account every month.

To go variable successfully, you need two things most homeowners don’t have: strong financial position and market attunement.

When I assess clients for variable rates, I look beyond the numbers. Fixed income with no bonus potential? Red flag. Additional debt outside the mortgage? Another red flag. New to homeownership? Major red flag.

But the biggest indicator isn’t financial. It’s psychological.

I ask about stress triggers. How comfortable are they with risk in other areas of their life? Do rate discussions keep them up at night?

Most people can’t handle the constant monitoring that variable rates demand. They want to set it and forget it. They want to sleep well.

You can’t put a price on peace of mind.

Canada’s unemployment jumped to 7.1% in August, with the economy losing 66,000 jobs. That’s the highest unemployment rate since 2016 outside of pandemic periods.

This economic weakness is exactly why the Bank of Canada cut rates. It’s also why variable rates might seem attractive.

But here’s what I learned from the pandemic: economic uncertainty makes variable rates riskier, not safer. When your income becomes less predictable, you need your housing costs to be more predictable.

The borrowers rushing into variable rates right now are making the same mistake people made in 2021. They’re assuming the trend continues in their favor.

I’ve worked with over 500 clients and helped them borrow more than $250 million since 2013. The pandemic changed how I approach rate recommendations.

I’m more cautious now. More focused on suitability than optimization.

For most of my clients, cash flow stability matters more than rate savings. Life already provides enough volatility. Their mortgage shouldn’t add more.

The application data shows variable and fixed rates drawing even in July 2025. That tells me the market is confused about the new reality.

When the spread was 50+ basis points, variable made sense for many people. At 0-20 basis points, you’re taking on significant timing and rate risk for minimal reward.

Variable rates aren’t inherently bad. But the environment that made them consistently attractive from 2009 to 2022 has changed.

The narrow spread means less upside potential. The economic uncertainty means more downside risk. The timing challenges mean most people will get it wrong.

I still recommend variable rates for clients who meet my criteria: strong financial position, comfort with market monitoring, and the ability to absorb payment increases without stress.

But that’s maybe 20% of the people walking through my door.

For everyone else, the math and psychology point to fixed rates. Sometimes the boring choice is the smart choice.

The variable rate party might be starting again. But I’ve seen how these parties end.

I’d rather help my clients sleep well than save $20 a month.