Variable-rate mortgage

There are two flavours. With an adjustable-rate mortgage (ARM) your payment moves up or down each time prime changes. With a true variable, the payment stays fixed but the split between principal and interest shifts — and if rates rise far enough you can hit your 'trigger rate', where the payment no longer covers interest.

Variable rates are quoted as prime plus or minus a spread (e.g. prime − 0.90%). When the Bank of Canada cuts the overnight rate, prime usually follows within days and your cost drops; when it hikes, it rises.

Historically variable has beaten fixed more often than not, but it trades certainty for exposure. The right choice depends on your risk tolerance, cash-flow cushion, and where the rate cycle is — which is exactly the conversation to have before you lock anything in.