Fixed vs. Variable Rate Mortgages in Edmonton: What's Right for You?

When I sit down with Edmonton homebuyers, one question inevitably comes up: "Should I go with a fixed or variable mortgage rate?" It's a question that deserves careful consideration, especially given Alberta's unique economic landscape.

As a mortgage broker and real estate agent working with Edmonton families every day, I've guided clients through this decision hundreds of times. There's no one-size-fits-all answer, but I can help you understand what might work best for your situation.

Understanding the Basics: Fixed vs. Variable Rates

Let's start with the fundamentals:

Fixed-Rate Mortgage: Your interest rate (and monthly payment) stays the same for the entire term of your mortgage, typically 2-5 years.

Variable-Rate Mortgage: Your interest rate fluctuates with the prime rate, which is influenced by the Bank of Canada's policy decisions. When the prime rate changes, so does your mortgage rate.

Now, let's dive deeper into how these options play out specifically in Edmonton's housing market.

Current Rate Trends in Edmonton

As of May 2025, Edmonton mortgage rates are showing interesting patterns:

• Fixed rates: Currently available around 4.5-5.5% for 5-year terms

• Variable rates: Currently around prime (5.95%) minus 0.5-1.00%, so approximately 4.95-5.45%

Note: These rates can vary based on your credit score, down payment amount, and other factors. Contact me for personalized rate information.

How Alberta's Economy Impacts Your Mortgage Choice

Edmonton's housing market doesn't always follow national trends. Here's what makes our situation unique:

Energy Sector Influence: Alberta's economy remains significantly tied to oil and gas. When energy prices rise, our local economy often strengthens, which can lead to higher interest rates to control inflation.

Employment Stability: Your industry matters. If you work in a sector with stable employment (like government, healthcare, or education), you might be better positioned to handle the uncertainty of a variable rate. If you're in a more volatile industry (like oil and gas or construction), the predictability of fixed rates might be more appealing.

Real Estate Market Resilience: Edmonton's housing market has historically been less volatile than Toronto or Vancouver, giving some homeowners more flexibility in their mortgage choices.

The Case for Fixed Rates in Edmonton

Why many Edmonton homebuyers choose fixed rates:

1. Predictability in uncertain times: Fixed payments make budgeting straightforward, especially important in Alberta where economic fluctuations can sometimes be more pronounced.

2. Protection against rate increases: If you believe interest rates will rise over your term (which many economists are currently forecasting), locking in now could save you money.

3. Peace of mind: For many first-time homebuyers, the security of knowing exactly what your payment will be for the next 5 years is worth a slight premium.

I recently worked with a young couple who both work in education. Despite the slightly higher initial rate, they chose a fixed mortgage because they valued the certainty it provided as they planned their family budget.

The Case for Variable Rates in Edmonton

Why some Edmonton homeowners opt for variable rates:

1. Historical savings: Over long periods, variable rates have typically saved borrowers money compared to fixed rates.

2. Lower penalties: If you need to break your mortgage before the term ends, variable-rate penalties are generally much lower than fixed-rate penalties.

3. Conversion flexibility: Most variable mortgages allow you to convert to a fixed rate at any time without penalty if rates start rising significantly.

One of my clients, an experienced investor purchasing his third rental property in the Mill Woods area, chose a variable rate specifically because of the lower penalties, as he anticipates possibly selling within 3 years.

Edmonton-Specific Factors to Consider

Real Estate Investment Climate: Edmonton's rental market remains strong, with average cap rates higher than in many Canadian cities. If you're buying an investment property, the initial savings of a variable rate might help your cash flow projections.

Edmonton Housing Affordability: Our city remains relatively affordable compared to many Canadian markets. This can give homeowners more buffer in their monthly budget to absorb potential rate increases with a variable mortgage.

Local Refinancing Trends: I've noticed Edmonton homeowners tend to refinance or move approximately every 3-4 years. If you fit this pattern, the lower penalties of a variable rate could save you thousands.

Making Your Decision: 5 Questions to Ask Yourself

1. What's your risk tolerance? Be honest about how much uncertainty you can handle in your monthly payments.

2. How long do you plan to stay in the home? Shorter timeframes might favour variable rates due to lower penalties.

3. What does your financial buffer look like? Could you handle a 1-2% increase in your interest rate without financial strain?

4. What are economists forecasting? While predictions aren't guarantees, they can provide valuable context.

5. What's happening in your industry? Consider your job security and income stability when evaluating mortgage options.

For a more detailed analysis of your specific situation, we can always schedule a call to go over your options. As a licensed real estate agent and a mortgage advisor, I provide you a dual advantage perspective that most agents can’t provide.

The Hybrid Approach: A Popular Edmonton Solution

Many of my clients are finding value in a middle-ground approach: splitting their mortgage between fixed and variable portions. For example, keeping 60% in a fixed rate for stability while putting 40% in a variable rate to take advantage of potential savings.

Most major Canadian lenders offer this option, and it can provide the best of both worlds for homeowners who are torn between the two choices.

Next Steps: Getting the Right Advice for Your Situation

Choosing between fixed and variable rates isn't just about today's interest rate difference – it's about aligning your mortgage with your financial situation, risk tolerance, and future plans.

Rather than trying to "time the market" (which is nearly impossible even for experts), focus on what makes the most sense for your personal circumstances.

If you'd like to discuss your specific situation and get personalized advice on which mortgage type might be best for you in today's Edmonton market, book a consultation or give me a call. I'm happy to run through different scenarios and help you understand all your options.

Remember, the "right" mortgage is the one that helps you sleep well at night – whether that's the certainty of fixed rates or the potential savings of variable rates.

This article was last updated on May 13, 2025, to reflect current Edmonton market conditions and mortgage regulations. Information may change, so always consult with a qualified mortgage professional for the most up-to-date advice.