Reverse Mortgage Variable vs Fixed Rate: Which Saves More? (2026)

Fixed or variable — it is the oldest question in mortgage lending, and for reverse mortgages in 2026 the answer is more nuanced than ever. With the Bank of Canada overnight rate at 2.75%, fixed reverse mortgage rates ranging from 6.54% to 7.24%, and variable options hovering near 6.95%, the gap between the two has narrowed to the point where the right choice depends entirely on your outlook for interest rates over the next 5 to 10 years. This guide provides the data, the projections, and the framework to make that decision with confidence.

Current Reverse Mortgage Rates: Fixed vs Variable (March 2026)

Before analyzing which option saves more, here is the complete rate picture across the four active reverse mortgage lenders in Ontario:

Lender	1-Year Fixed	3-Year Fixed	5-Year Fixed	Variable Rate
HomeEquity Bank (CHIP)	6.49%	6.99%	7.24%	Prime + 2.50% (6.95%)
Equitable Bank	4.99%*	6.24%	6.54%	Prime + 2.60% (7.05%)
Bloom Financial	N/A	6.49%	6.79%	Not offered
Home Trust	N/A	6.59%	6.89%	Not offered

*Equitable Bank's 4.99% is a promotional 1-year rate available on qualifying properties.

Note: Variable rates are calculated with the current prime rate of 4.45%. As the Bank of Canada adjusts the overnight rate, prime moves accordingly, and variable reverse mortgage rates adjust.

Rick Sekhon can confirm the most current rates for your specific situation — published rates are starting points, and available rates may vary based on property type, location, age, and loan-to-value ratio.

According to the Bank of Canada, the overnight rate has been reduced eight times since June 2024, from 5.00% to 2.75%. Bond market pricing as of March 2026 suggests the terminal rate for this easing cycle may be in the 2.25%–2.50% range.

How Fixed Rates Work on a Reverse Mortgage

A fixed-rate reverse mortgage locks in your interest rate for the duration of the term — typically 1, 3, or 5 years. At the end of the term, the rate renews at the prevailing rate for another term of your choosing. Key characteristics:

• Interest rate does not change during the term, regardless of Bank of Canada movements
• Provides certainty — you know exactly how fast the balance will grow
• At renewal, the new rate reflects market conditions at that time
• No monthly payments are required (interest compounds and is added to the balance)

Fixed rates on reverse mortgages are driven primarily by Government of Canada bond yields (the 5-year bond for 5-year fixed terms) plus a lender-specific risk premium. They do not move in lockstep with the Bank of Canada overnight rate.

How Variable Rates Work on a Reverse Mortgage

A variable-rate reverse mortgage has an interest rate that fluctuates with the lender's prime rate, which tracks the Bank of Canada overnight rate. Currently, both CHIP (HomeEquity Bank) and Equitable Bank offer variable reverse mortgage products:

• Rate adjusts when the Bank of Canada changes the overnight rate
• Expressed as prime + a spread (e.g., prime + 2.50%)
• When the BoC cuts, your rate drops; when the BoC raises, your rate increases
• Provides opportunity to benefit from further rate cuts
• No monthly payments required

The Unusual 2026 Dynamic: Variable Is Higher Than Fixed

In conventional mortgage lending, variable rates are typically lower than fixed rates because the borrower assumes the interest rate risk. With reverse mortgages in March 2026, the opposite is true:

Product	Rate	Which Is Lower?
Equitable Bank 5-year fixed	6.54%	✓ Lower
Equitable Bank variable	7.05%	✗ Higher
CHIP 5-year fixed	7.24%	✓ Lower
CHIP variable	6.95%	✗ Higher (but closer)

This inversion exists because fixed rates have already priced in expected Bank of Canada rate cuts through bond market expectations. The 5-year Government of Canada bond yield (which drives fixed pricing) reflects the market's view that rates will remain low — so fixed rates have already come down. Variable rates, pegged to the current prime rate, have not yet benefited from future expected cuts.

This means choosing variable today is a bet that the Bank of Canada will cut rates further and faster than bond markets have already priced in.

10-Year Projection: Fixed vs Variable Under Three Scenarios

This is the analysis that matters most. Rick Sekhon models these projections for every client. Here we show the balance growth on a $200,000 reverse mortgage under three interest rate scenarios over 10 years.

Scenario 1: Rates Stay Flat (BoC holds at 2.75%)

Year	Fixed Balance (6.54%)	Variable Balance (7.05%)	Fixed Advantage
1	$213,080	$214,100	$1,020
2	$227,015	$229,189	$2,174
3	$241,860	$245,339	$3,479
4	$257,677	$262,631	$4,954
5	$274,527	$281,148	$6,621
7	$311,670	$322,230	$10,560
10	$375,700	$393,350	$17,650

Winner: Fixed by $17,650 over 10 years. If rates stay where they are, fixed is the clear choice because it starts lower.

Scenario 2: BoC Cuts to 2.00% by Mid-2027 (Variable rate drops to ~6.10%)

Year	Fixed Balance (6.54%)	Variable Balance (starts 7.05%, drops to ~6.10% by Year 2)	Difference
1	$213,080	$213,550 (blended ~6.78%)	$470 (fixed leads)
2	$227,015	$226,570 (now at 6.10%)	−$445 (variable leads)
3	$241,860	$240,390	−$1,470
5	$274,527	$270,100	−$4,427
7	$311,670	$304,380	−$7,290
10	$375,700	$360,200	−$15,500

Winner: Variable by $15,500 over 10 years — but only if the BoC cuts by another 75 bps and holds there. This scenario requires aggressive easing that bond markets have only partially priced in.

Scenario 3: BoC Raises Back to 3.50% by 2028 (Variable rate rises to ~7.60%)

Year	Fixed Balance (6.54%)	Variable Balance (starts 7.05%, rises to ~7.60% by Year 3)	Difference
1	$213,080	$214,100	$1,020 (fixed leads)
2	$227,015	$229,700 (blended ~7.35%)	$2,685
3	$241,860	$247,150 (now at 7.60%)	$5,290
5	$274,527	$286,500	$11,973
7	$311,670	$332,100	$20,430
10	$375,700	$410,900	$35,200

Winner: Fixed by $35,200 over 10 years. In a rising rate environment, the fixed rate provides substantial protection.

Summary of Scenarios

Scenario	BoC Direction	10-Year Fixed Balance	10-Year Variable Balance	Better Choice
Rates stay flat	Hold at 2.75%	$375,700	$393,350	Fixed (saves $17,650)
Aggressive cuts	Cut to 2.00%	$375,700	$360,200	Variable (saves $15,500)
Rates rise again	Rise to 3.50%	$375,700	$410,900	Fixed (saves $35,200)

The asymmetry is important: fixed protects you more on the downside (rates rising) than variable saves you on the upside (rates falling). This is because the fixed rate already starts lower in the current environment.

Historical Context: When Variable Won in the Past

Variable rates have outperformed fixed rates during sustained easing cycles. The most relevant recent periods:

Period	BoC Rate Movement	Variable vs Fixed Outcome
2008–2010 (financial crisis)	4.50% → 0.25%	Variable won decisively
2015–2016 (oil price crash)	1.00% → 0.50%	Variable won modestly
2020–2021 (COVID)	1.75% → 0.25%	Variable won decisively
2022–2023 (inflation fight)	0.25% → 5.00%	Fixed won decisively
2024–2026 (easing cycle)	5.00% → 2.75%	Variable has won so far

According to The Globe and Mail, Canadian borrowers who chose variable rates have historically come out ahead over long periods — but the volatility can be significant, and the worst years for variable-rate borrowers (2022–2023) were extremely costly.

For reverse mortgage borrowers, the impact of rate volatility is compounded by the nature of the product: there are no monthly payments to adjust, so higher rates simply accelerate balance growth silently. A traditional mortgage borrower notices rate changes through payment adjustments; a reverse mortgage borrower may not realize the impact until they review an annual statement.

The Hybrid Approach: Split Your Advance

Some lenders allow you to split your reverse mortgage between fixed and variable portions. This hedges your position:

Example: $200,000 total advance

• $140,000 at 5-year fixed (6.54%) — covers core debt payoff needs
• $60,000 at variable (7.05%) — benefits if rates fall further

This approach captures some upside from potential BoC cuts while protecting the majority of your balance with rate certainty. Rick Sekhon can structure this split through Equitable Bank, which offers the most flexibility in how advances are allocated between fixed and variable portions.

OSFI requires lenders to clearly disclose the terms of both fixed and variable portions, including how renewals and conversions work. FCAC guidelines mandate that borrowers understand the risks of variable-rate products before committing.

The Term Length Decision

For fixed-rate reverse mortgages, term length matters independently of the fixed-vs-variable question:

Term	Current Rate (Equitable Bank)	Pros	Cons
1-year fixed	4.99% (promotional)	Lowest starting rate; flexibility to switch	Renewal risk in 12 months
3-year fixed	6.24%	Moderate certainty; renewal in medium term	Higher than 1-year promo
5-year fixed	6.54%	Maximum certainty; locked in longest	Highest fixed rate; less flexibility

The promotional 1-year rate from Equitable Bank (4.99%) is particularly interesting in 2026. Even if the renewal rate after one year is 5.99%, the blended average over two years (approximately 5.49%) is still lower than the current 5-year fixed rate. Rick Sekhon often recommends the 1-year promo for clients who want the lowest possible starting cost and are comfortable with renewal uncertainty.

Rolling 1-Year Terms vs 5-Year Lock

Strategy	Year 1 Rate	Year 2 Rate (Est.)	Year 3 Rate (Est.)	5-Year Avg Rate	5-Year Balance on $200K
5-year fixed (lock now)	6.54%	6.54%	6.54%	6.54%	$274,527
Rolling 1-year (optimistic)	4.99%	5.49%	5.99%	~5.69%	$263,700
Rolling 1-year (pessimistic)	4.99%	6.29%	6.79%	~6.21%	$270,100

Even the pessimistic rolling-1-year scenario costs slightly less than the 5-year lock over five years — primarily because of the deeply discounted first year. This is not guaranteed to persist, but it illustrates why the 1-year promotional rate deserves serious consideration.

Who Should Choose Fixed?

Fixed-rate reverse mortgages are best for Ontario homeowners who:

• ✓ Want certainty about how fast the balance will grow
• ✓ Believe rates are near their floor and may rise
• ✓ Are drawing a large lump sum (higher balance = more interest rate sensitivity)
• ✓ Have moderate risk tolerance and prefer predictability
• ✓ Plan to hold the reverse mortgage for 5+ years without major changes

Who Should Choose Variable?

Variable-rate reverse mortgages are best for Ontario homeowners who:

• ✓ Believe the Bank of Canada will cut rates further beyond current levels
• ✓ Are drawing a smaller amount (less total interest exposure)
• ✓ Are comfortable with balance growth that may accelerate or decelerate
• ✓ Want the ability to benefit from future rate cuts without refinancing
• ✓ Have a shorter expected time horizon (variable may be convertible to fixed later)

What Rick Sekhon Recommends in March 2026

Based on the current rate environment, Rick Sekhon's general guidance for Ontario reverse mortgage clients:

For most clients: The Equitable Bank 5-year fixed at 6.54% offers the best combination of rate and certainty. It is lower than the variable rate, eliminates rate risk for five years, and provides a stable foundation for retirement planning.

For rate-sensitive clients: The Equitable Bank 1-year promotional rate at 4.99% provides the lowest possible first-year cost. If you are willing to accept renewal uncertainty, this can produce the lowest average rate over a multi-year horizon.

For clients who strongly believe rates will fall further: The CHIP variable rate at prime + 2.50% (currently 6.95%) provides direct exposure to future Bank of Canada cuts. If the overnight rate drops to 2.00%, this variable rate would fall to approximately 6.00% — below current fixed rates.

Every situation is different. The right choice depends on your loan amount, your time horizon, your tolerance for uncertainty, and your personal view on where Canadian interest rates are heading. Rick Sekhon models each scenario individually, comparing total projected costs across fixed, variable, and hybrid structures for your specific borrowing amount.

Frequently Asked Questions

Can I switch from variable to fixed (or vice versa) after taking a reverse mortgage?

Policies vary by lender. Equitable Bank generally allows conversion from variable to fixed at the prevailing fixed rate. Converting from fixed to variable typically requires waiting until the term renewal date. There may be conversion fees. CHIP (HomeEquity Bank) has its own conversion policies — Rick Sekhon can clarify the specific terms for your lender.

Does the variable rate change immediately when the Bank of Canada cuts?

Yes — variable reverse mortgage rates adjust within days of a Bank of Canada overnight rate change. When the BoC cuts by 25 basis points, prime drops by 25 bps, and your variable reverse mortgage rate drops by the same amount. The effect on your balance growth is immediate.

What happens at the end of a fixed term?

You renew at the prevailing rate for a new term of your choosing (1, 3, or 5 years). The renewal process is administrative — there is no new application, appraisal, or qualification process. If you do nothing, the lender will typically renew at their posted rate for the same term length. Rick Sekhon always contacts clients before renewal to ensure they get the best available rate.

Is there a cap on how high the variable rate can go?

There is no formal rate cap on variable reverse mortgages in Canada. If the Bank of Canada raises the overnight rate significantly, the variable reverse mortgage rate will increase proportionally. This is the primary risk of variable-rate products. OSFI and FCAC require lenders to disclose this risk clearly before borrowers commit to a variable rate.

How does Bloom Financial compare on rates if they do not offer variable?

Bloom Financial offers only fixed-rate reverse mortgages. Their 5-year fixed rate (6.79% as of March 2026) is competitive with CHIP but higher than Equitable Bank. Bloom's differentiator is their lifetime rate lock feature — once locked, the rate never changes for the life of the loan. This eliminates renewal risk entirely, which is valuable for borrowers who plan to stay in their home for 10+ years. See our Bloom Financial review for the full analysis.

Should I wait for the next Bank of Canada announcement before deciding?

The next scheduled BoC announcement will adjust variable rates (if a cut occurs) but is unlikely to materially change fixed rates, which are driven by bond yields. If you are leaning toward fixed, there is little benefit to waiting. If you are leaning toward variable, waiting for a cut would mean your starting rate is immediately lower — but you lose the time value of having funds in hand. Rick Sekhon can help you evaluate the trade-off specific to your timeline.

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This content is for illustrative purposes only. Rates may vary. Call Rick Sekhon for the best rates and more information.