Dibz3-year variable mortgage rates in Canada (2026): a shorter float
3-year variable mortgage rates in Canada: how prime-based pricing works, how it compares with fixed terms, trigger rates, penalties and a payment example.
A 3-year variable mortgage has a rate tied to your lender's prime rate for a three-year term. Canada has no published 3-year variable average: the Bank of Canada's estimated variable rate (3.58% on October 1, 2026) refers to 5-year variable mortgages, and its new-loan figures group all variable terms together, at 3.75% insured and 3.86% uninsured in July 2026. Prime was 4.45% on September 30, 2026.
So a 3-year variable rate is each lender's own price, built the same way as the 5-year version: prime minus (or plus) a discount that stays fixed for the term. Here's what the shorter term changes.
What a 3-year variable mortgage is
Your rate is set as prime plus or minus a fixed amount, and it moves every time the lender's prime rate moves. The term is three years, after which you renew into a new variable term, lock into a fixed rate or switch lenders. Not every lender offers a 3-year variable; the 5-year is the more widely available variable term.
How 3-year variable rates are set
Prime is the anchor, and prime follows the Bank of Canada's policy rate. Lenders set the discount from prime separately for each term, based on their funding costs and how hard they're competing. The discount on a 3-year variable can be bigger or smaller than on a 5-year; there's no fixed rule.
- Prime rate
- Estimated variable rate
Series V80691311 and BROKER_AVERAGE_5YR_VRM (an estimate for 5-year variable mortgages; the Bank has no separate 3-year variable series). Latest: 4.45% and 3.58%.
Source: Bank of Canada (free at bankofcanada.ca)
Show the numbers
| Prime rate | Estimated variable rate | |
|---|---|---|
| Sep 2024 | 6.5% | 5.4% |
| Oct 2024 | 6% | 5% |
| Nov 2024 | 6% | 5% |
| Dec 2024 | 5.5% | 4.5% |
| Jan 2025 | 5.5% | 4.5% |
| Feb 2025 | 5.2% | 4.4% |
| Mar 2025 | 5% | 4.1% |
| Apr 2025 | 5% | 4.2% |
| May 2025 | 5% | 4.2% |
| Jun 2025 | 5% | 4.2% |
| Jul 2025 | 5% | 4.3% |
| Aug 2025 | 5% | 4.2% |
| Sep 2025 | 4.7% | 4% |
| Oct 2025 | 4.7% | 3.9% |
| Nov 2025 | 4.5% | 3.7% |
| Dec 2025 | 4.5% | 3.8% |
| Jan 2026 | 4.5% | 3.7% |
| Feb 2026 | 4.5% | 3.7% |
| Mar 2026 | 4.5% | 3.7% |
| Apr 2026 | 4.5% | 3.6% |
| May 2026 | 4.5% | 3.6% |
| Jun 2026 | 4.5% | 3.6% |
| Jul 2026 | 4.5% | 3.6% |
| Aug 2026 | 4.5% | 3.6% |
| Sep 2026 | 4.5% | 3.6% |
The estimated variable rate sat about 1 point below prime in late 2024 and about 0.87 points below by October 2026. From September 2024 to November 2025, prime fell by two points and the estimated variable rate by about 1.7, and both have held close to steady since.
Who a 3-year variable suits
- Borrowers who expect rates to hold or fall and want their rate to follow without waiting five years.
- People who may move or refinance in the next few years. Variable penalties are usually just three months' interest, and the term ends sooner.
- Those who want another decision point soon, for example to reassess once a career change or a family change has settled.
Who it doesn't suit
- Anyone who needs a steady payment. On an adjustable-payment product, each prime change resets your payment.
- Borrowers worried about a renewal in a high-rate year. A shorter term means you face the market again sooner.
Adjustable vs fixed payments
Variable mortgages come in two styles:
- Adjustable payment: the payment is recalculated when prime changes, so your amortization stays on track.
- Fixed payment: the payment stays the same, and the share going to interest rises or falls with rates.
With a fixed payment there's a trigger rate, the point where the whole payment goes to interest. On a $400,000 mortgage at 3.75% over 25 years, the monthly payment is about $2,050, of which about $1,240 is interest in the first month. The trigger rate would be roughly 6.23%. If rates passed it, lenders usually require a higher payment, a lump sum or a switch to fixed.
Starting rate: July 2026 average on new insured variable mortgages (V122667776). Dibz calculation, semi-annual compounding as an approximation (some lenders compound variable mortgages monthly). Moves are illustrations, not forecasts.
Source: Bank of Canada (free at bankofcanada.ca)
Show the numbers
| Value | |
|---|---|
| 3.25% (−0.50) | $1,945 |
| 3.50% (−0.25) | $1,997 |
| 3.75% (average) | $2,050 |
| 4.00% (+0.25) | $2,104 |
| 4.25% (+0.50) | $2,159 |
How it compares with a 3-year fixed
The closest fixed comparison is the Bank of Canada's "3 to less than 5 years" bucket, which averaged 3.99% for new insured loans in July 2026, compared with 3.75% for new insured variable loans. If rates stayed exactly where they are, the variable would cost a little less. If prime rose by more than about a quarter point early in the term, the fixed would likely come out ahead.
The posted 3-year fixed rate was 6.05% on September 30, 2026, but posted rates are list prices few people pay. There's no posted variable rate.
Insured vs uninsured
Insured variable loans (less than 20% down) averaged 3.75% in July 2026, uninsured 3.86%. The 0.11-point gap is small compared with the 1-to-3-year and 5-year-and-over fixed buckets, where it was more than 0.4 points.
Penalties and renewal
A variable mortgage typically costs three months' interest to break. On $400,000 at 3.75%, that's about $3,750. Many lenders allow a conversion to fixed during the term without a penalty.
At the end of three years you renew. Federally regulated lenders must send a renewal statement at least 21 days ahead, and since November 2024 a straight switch to another lender generally doesn't require the stress test. For a new mortgage, you'll be qualified at the greater of your rate plus 2 points or 5.25%: 5.75% at 3.75%, a payment of about $2,500.
Worked example: $400,000 over 25 years
| Item | 3.75% variable (insured average) | 3.99% fixed, 3 to 5 years (insured average) |
|---|---|---|
| Monthly payment | $2,050 | $2,102 |
| Interest over 3 years if rates don't change | $43,013 | $45,798 |
| Balance after 3 years | $369,205 | $370,129 |
If nothing changed, the variable would save about $2,785 in interest over three years. That saving would shrink or disappear if prime rose. Figures use semi-annual compounding as an approximation; some lenders compound variable mortgages monthly.
Try our mortgage calculator to test different rate paths.
Related reading
Compare the 5-year variable, the 3-year fixed, or a HELOC. Lender pages: CIBC, National Bank, Simplii Financial, Tangerine.
FAQ
What is the average 3-year variable mortgage rate in Canada?
There's no 3-year-specific average. The Bank of Canada's new-loan variable average, which covers all variable terms, was 3.75% insured and 3.86% uninsured in July 2026. Its estimated 5-year variable rate was 3.58% on October 1, 2026.
Is a 3-year variable cheaper than a 3-year fixed?
On average it has been recently: 3.75% for new insured variable loans vs 3.99% for insured fixed loans of 3 to 5 years in July 2026. The outcome depends on what prime does during the term.
How often does a variable rate change?
Whenever your lender changes its prime rate, which usually happens soon after a Bank of Canada policy rate decision. The Bank has eight scheduled decision dates a year.
What is the penalty for breaking a 3-year variable mortgage?
Usually three months' interest, about $3,750 on $400,000 at 3.75%. Your contract sets the exact terms.
Rates shown are Bank of Canada averages, not offers. Talk to a licensed mortgage professional before choosing a term.
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