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The Variable Rate Breakeven Calculator | Your Mortgage Minute · Your Mortgage Minute | Onlendhub

• 0:15
  SPEAKER_00: Welcome to another episode of your mortgage minute.
• 0:17
  SPEAKER_00: Mortgage rates are at a crossroads.
• 0:19
  SPEAKER_00: Fixed rates are holding steady, but variable rates are tempting borrowers with lower initial payments.
• 0:25
  SPEAKER_00: The question everyone's asking: how many Bank of Canada rate cuts do you actually need for variable to beat fixed over your term?
• 0:33
  SPEAKER_00: Today we're building a break-even calculator you can use in under two minutes.
• 0:37
  SPEAKER_00: We have our mortgage expert Mooley with us.
• 0:40
  SPEAKER_00: Mooley, walk us through the math.
• 0:43
  SPEAKER_01: Great question, Sarah.
• 0:44
  SPEAKER_01: Here's the reality as of September 2026.
• 0:47
  SPEAKER_01: The spread between five-year fixed and variable is about 70 basis points.
• 0:51
  SPEAKER_01: Fixed is around 4.65%.
• 0:54
  SPEAKER_01: Variable is around 3.95%.
• 0:57
  SPEAKER_01: That gap means variable only wins if the Bank of Canada cuts rates at least two to three times, each cut being 0.25% over your term.
• 1:06
  SPEAKER_00: Let's make this concrete.
• 1:30
  SPEAKER_01: Variable at 3.95% starts at$3,150, a$230 monthly savings up front.
• 1:39
  SPEAKER_01: But here's the catch.
• 1:40
  SPEAKER_01: For variable to beat fixed over a five-year term, the average variable rate over those five years must be low enough that your total interest paid is less than the fixed option.
• 1:50
  SPEAKER_01: With a 70 basis point starting spread, you need the Bank of Canada to cut from 2.25% down to around 1.5%.
• 1:59
  SPEAKER_01: That's three cuts of 0.25% each.
• 2:02
  SPEAKER_01: Just to break even.
• 2:03
  SPEAKER_00: So if the Bank of Canada only cuts once or twice, fixed wins.
• 2:07
  SPEAKER_01: Exactly.
• 2:08
  SPEAKER_01: One cut to 2%, fixed still wins by a wide margin.
• 2:12
  SPEAKER_01: Two cuts to 1.75%, you're close, but fixed likely still edges it out.
• 2:17
  SPEAKER_01: You need three cuts minimum to 1.5% for variable to pull ahead.
• 2:21
  SPEAKER_01: And if inflation rebounds and rates hold or rise, variable loses badly, you could pay$10,000 to$15,000 more in interest over five years.
• 2:29
  SPEAKER_00: What's the actual calculator formula listeners can use?
• 2:33
  SPEAKER_01: Here it is step by step.
• 2:34
  SPEAKER_01: First, find your fixed rate and variable rate quote.
• 2:38
  SPEAKER_01: Subtract variable from fixed.
• 2:40
  SPEAKER_01: That's your starting spread.
• 2:41
  SPEAKER_01: In our example, 4.65 minus 3.95 equals 0.70 or 70 basis points.
• 2:48
  SPEAKER_01: Second, divide that spread by 0.25.
• 2:52
  SPEAKER_01: The size of each typical Bank of Canada cut.
• 2:54
  SPEAKER_01: 70 divided by 25 equals 2.8.
• 2:58
  SPEAKER_01: Round up to 3.
• 2:59
  SPEAKER_01: That's your breakeven number of cuts.
• 3:01
  SPEAKER_01: Third, ask, do I believe the Bank of Canada will cut at least three times over my term?
• 3:07
  SPEAKER_01: If yes, variable might win.
• 3:09
  SPEAKER_01: If no, or if you're unsure, fixed is the safer bet.
• 3:13
  SPEAKER_00: Are there scenarios where this math changes?
• 3:16
  SPEAKER_01: Two key scenarios.
• 3:17
  SPEAKER_01: First, if you have a variable rate with a discount, say prime minus 0.8 instead of prime minus 0.6, your starting spread widens and you need fewer cuts to break even.
• 3:29
  SPEAKER_01: Second, if you're choosing a three-year term instead of five, the math shifts because you're betting on near-term cuts, not a five-year average.
• 3:36
  SPEAKER_01: But here's the red flag.
• 3:38
  SPEAKER_01: Never choose variable just because the teaser rate looks lower.
• 3:41
  SPEAKER_01: I've seen borrowers lock variable at a 60 basis point spread, assume two cuts will happen, and end up paying more when inflation sticks and rates hold.
• 3:50
  SPEAKER_01: The Bank of Canada has held at 2.25% since December 2025 for a reason.
• 3:56
  SPEAKER_01: Inflation is still above target.
• 3:59
  SPEAKER_00: What's the actionable takeaway for someone renewing in the next 90 days?
• 4:03
  SPEAKER_01: Run this calculator today.
• 4:05
  SPEAKER_01: Get your fixed and variable quotes in writing.
• 4:08
  SPEAKER_01: Plug the numbers into the formula, spread divided by 0.25 equals breakeven cuts.
• 4:15
  SPEAKER_01: Then ask yourself honestly: do I believe that many cuts will happen?
• 4:19
  SPEAKER_01: If you're not confident or if a payment increase would strain your budget, fixed is the right choice.
• 4:24
  SPEAKER_01: If you have cash flow cushion and believe three or more cuts are coming, variable could save you thousands.
• 4:30
  SPEAKER_00: Three key takeaways.
• 4:32
  SPEAKER_00: One, the breakeven formula is your starting spread divided by 0.25.
• 4:37
  SPEAKER_00: Two, as of September 2026, you need at least three Bank of Canada cuts for variable to beat fixed.
• 4:44
  SPEAKER_00: Three, never bet on rate cuts you're not confident will happen.
• 4:48
  SPEAKER_00: That's your mortgage minute by onlandhub.ca.