Variable-Rate Mortgage explained
With a variable-rate mortgage, your interest rate is tied to the lender's prime rate, which in turn tends to move with the Bank of Canada's policy rate. Your rate is expressed relative to prime, such as prime minus 0.5%, so when prime changes your interest cost changes too. There are two common structures: in one, your payment stays the same and the split between principal and interest shifts; in the other, your payment itself changes when prime moves.
Variable rates have historically often been lower than fixed rates at the time of signing, but they carry uncertainty because payments or the interest portion can rise. Many variable mortgages can be converted to a fixed rate during the term, giving borrowers an exit if they become uncomfortable with rate movement.