Renewal season is in full swing, and this week alone we've seen the same question come up over and over from BC homeowners: should I lock in fixed or go variable? It sounds simple, but the right answer depends entirely on your income, your timeline, and what's actually happening in the rate environment right now—not on what a bank app offers you in a push notification.
The Bank of Canada held its overnight rate at 2.25% on June 10, 2026, for the fifth consecutive meeting, while flagging ongoing uncertainty from U.S. trade tensions and global instability. Meanwhile, the Government of Canada 5-year benchmark bond yield moved up to 3.15% as of June 9, 2026—which matters because fixed mortgage rates are priced off those bond yields, not the BoC rate. Understanding this split is the starting point for any honest renewal conversation.
Why the Fixed vs. Variable Question Is Harder Than It Looks
When clients come to us at renewal, many have already received an offer from their current lender—sometimes through an app, sometimes a letter in the mail. What they don't always realize is that the lender's renewal offer rarely reflects the best available option, and the choice between fixed and variable is being presented without context.
Variable rates move with the BoC's overnight rate. If the Bank cuts again later in 2026, a variable-rate borrower benefits automatically. Fixed rates, by contrast, are locked in based on where bond yields sit today. With the 5-year GoC bond yield at 3.15% (as of June 9, 2026), fixed rates have edged up modestly—which means the spread between fixed and variable options has narrowed compared to where it was a year ago.
Neither choice is automatically right. The decision is about your specific risk tolerance, your cash flow needs, and how long you plan to stay in the property.
The Case for Fixed in BC Right Now
Fixed makes the most sense when you need certainty. We see this most often with self-employed clients whose income is variable year to year, families with tight monthly budgets, or anyone who would genuinely lose sleep over a payment increase. If you locked in a pandemic-era rate at 1.5–2.75% and you're now facing a reset that could push payments up significantly, the last thing you want is additional uncertainty layered on top.
A longer fixed term—say three or five years—also works well for clients who know they're staying put. If you're in Metro Vancouver, bought your home a few years ago, and plan to be there through your kids' school years, locking in gives you a predictable budget for that entire window. The peace of mind has genuine financial value; it's not just psychological.
One important BC-specific consideration: the stress test still applies when you switch lenders at renewal (you must qualify at the contract rate plus 2%, or 5.25%, whichever is higher). If your income situation has changed—say you transitioned to self-employment or your property value has dropped—this can limit your ability to move lenders for a better rate. Starting the renewal conversation 120 days before your maturity date gives us maximum room to work.
The Case for Variable—And Who It's Right For
Variable rates carry more month-to-month uncertainty, but they offer real advantages for the right borrower. If you're in a strong income position, have a financial buffer, and believe the BoC may cut rates further in the next 12–24 months, a variable product lets you benefit from those cuts without paying a penalty to break a fixed term.
Variable also tends to carry lower prepayment penalties. This matters enormously for BC borrowers who may need to refinance, sell, or change their mortgage structure before their term ends. A fixed-rate IRD (interest rate differential) penalty can run into the tens of thousands of dollars; a variable penalty is typically just three months' interest.
We see variable working particularly well for clients who bought recently and expect their income to rise, or for self-employed borrowers with strong documented income who want flexibility to pull equity out as their business grows. If that sounds like your situation, exploring your options through our mortgage renewal process is worth doing well before your lender's deadline arrives.
What a Shorter Term Might Actually Do for You
One option many renewal clients overlook is a shorter fixed term—one or two years rather than five. If bond yields soften later in 2026 or into 2027, a 2-year fixed gives you a predictable rate today while letting you reprice sooner when the market may be more favourable.
This strategy works best when the rate premium for a 5-year term is meaningful and your outlook for the next few years involves significant life changes—a planned property sale, a growing business that might trigger a refinance, or a potential move. We work through this math with clients regularly, because the lowest rate on paper isn't always the lowest cost over your actual holding period.
Self-Employed? Your Renewal Decision Has Extra Layers
If you're self-employed, renewal is genuinely more complicated than it is for salaried borrowers. Your qualifying income depends on how your accountant structures your financials, whether you've had a strong or weak reporting year, and how the lender calculates your income under their specific program.
We see this weekly: a self-employed client gets a renewal offer from their current lender because switching would require re-qualifying, and their most recent tax return shows a lower income than what they actually earn. In some cases, the current lender's renewal offer is the only realistic option. In others, we're able to use gross revenue, a 2-year average, or an alternative lender program to unlock a better rate and term. You won't know which situation you're in until you actually explore it with a broker who works with business-for-self clients regularly.
If this is your situation, our self-employed mortgage page has a breakdown of how income is calculated across different lender tiers—it's a good starting point before your renewal conversation.
Frequently Asked Questions
Q: Does the stress test apply when I renew with my current lender?
No—if you stay with your existing lender and simply renew your mortgage, the stress test does not apply. However, if you switch to a new lender to get a better rate or product, you will need to re-qualify at the stress test rate (the higher of your contract rate plus 2%, or 5.25%). This is exactly why some borrowers with changed income situations or lower property values end up staying with their current lender even when a better rate is available elsewhere. Knowing this dynamic early gives us time to find solutions.
Q: Is it better to wait and see if rates drop before renewing?
It depends on when your maturity date is. If you're within 120 days of renewal, you can typically lock in a rate today and still benefit from a lower rate if one becomes available before your close date—some lenders allow you to relock at a better rate during that window. Waiting until the last minute risks your options narrowing. The Bank of Canada held at 2.25% on June 10, 2026, with no immediate cuts signalled, so there's no guarantee rates will be materially lower by summer.
Q: What if I want to sell in the next year—should I still sign a 5-year term?
Almost certainly not. Signing a 5-year fixed term when you plan to sell within 12–18 months can result in a very large prepayment penalty—sometimes $10,000–$30,000 or more depending on your balance and how rates have moved. A shorter term, a variable rate with a three-month interest penalty, or a portable mortgage are all worth exploring. We regularly help clients who are listing their home work through the math on this before they commit to anything.
Q: I'm self-employed and my income dropped on paper last year. Can I still switch lenders at renewal?
Possibly—it depends on your numbers and which lender programs apply to your situation. Some alternative lenders use bank deposits, gross revenue, or a blended average to calculate income rather than line 15000 of your tax return. Others use stated income programs for well-established businesses. We can look at two to three years of your financials and tell you quickly which tier of lenders you qualify with and whether switching makes financial sense given the switching costs and stress test hurdle.
If your mortgage renewal is coming up—or if you're already sitting on a lender offer and not sure whether to sign—reach out to us at E7 Mortgages before you commit. James Li and the E7 team work with BC homeowners and self-employed borrowers every week on exactly these decisions. There's no cost to get a second opinion, and a 20-minute conversation could save you thousands over your next term. Contact us at e7mortgages.ca or call us directly.