Fixed vs Variable Mortgage: Which Is Better in 2026? [Comparison]

The choice between a fixed-rate mortgage and a variable-rate mortgage is one of the most important financial decisions in a person's life. With a commitment that typically lasts 20-30 years, making the wrong choice can cost tens of thousands of euros. But in the economic context of 2026, with ECB rates settling after the 2022-2023 hikes, which option is really the better deal?

In this guide, we will compare the two types of mortgages in detail, analyze current reference rates, run simulations with real numbers, and help you choose the solution best suited to your situation. You can also simulate your payment with our mortgage payment calculator.

How a Fixed-Rate Mortgage Works

With a fixed-rate mortgage, the interest rate is determined at the time of signing and remains unchanged for the entire duration of the loan. The monthly payment is constant from start to finish.

The reference rate: IRS (Interest Rate Swap)

The fixed rate is based on the IRS (also called Eurirs), an interbank rate that reflects the market's expectations for the future trajectory of interest rates. The bank adds its own spread (profit margin) to this, typically between 0.5% and 2%.

Example: 20-year IRS at 2.50% + bank spread of 0.80% = final fixed rate of 3.30%.

As of March 2026, the 20-year IRS stands at around 2.40-2.60%, down from the 2023 peaks (when it exceeded 3.5%). This makes fixed rates more accessible compared to a couple of years ago.

Advantages of a fixed rate

• Certainty: you know exactly how much you will pay each month for the entire duration
• Protection from rate increases: if rates rise, your payment does not change
• Financial planning: ideal for those with a fixed income who want security
• Peace of mind: no anxiety related to market movements

Disadvantages of a fixed rate

• Higher initial cost: the fixed rate is almost always higher than the variable rate at the time of signing
• No benefit from rate decreases: if rates drop, you continue paying the same amount
• Refinancing as the only way out: to get better terms you would need to refinance the mortgage (with costs and processing time)

How a Variable-Rate Mortgage Works

With a variable-rate mortgage, the interest rate is recalculated periodically (usually every 1, 3, or 6 months) based on the movement of a reference index. The payment changes over time, potentially both decreasing and increasing.

The reference rate: Euribor

The variable rate is based on the Euribor (Euro Interbank Offered Rate), the rate at which European banks lend money to each other. The most common terms are 1-month, 3-month, or 6-month Euribor. Here too, the bank adds its own spread.

Example: 3-month Euribor at 2.30% + bank spread of 0.90% = current variable rate of 3.20%.

As of March 2026, the 3-month Euribor is around 2.20-2.40%, well down from the peak of 4% reached at the end of 2023, thanks to the ECB rate cuts that began in 2024.

Advantages of a variable rate

• Lower initial rate: generally lower than the fixed rate at the time of signing
• Benefit from rate decreases: if rates fall, your payment decreases
• Historically more cost-effective: over the long term, the variable rate has often cost less than the fixed rate

Disadvantages of a variable rate

• Uncertainty: you do not know how much you will pay in 5 or 10 years
• Risk of unsustainable payments: in case of sharp rate increases (as happened in 2022-2023)
• Financial stress: uncertainty can generate anxiety, especially for single-income families

IRS vs Euribor: Reference Rate Comparison

Practical Simulation: 150,000 Euro Mortgage Over 25 Years

Let's look at a concrete comparison with real numbers, based on March 2026 rates. We assume a mortgage of 150,000 euros over 25 years.

Fixed-rate scenario: 3.30% rate

Variable-rate scenario: initial rate 3.10% with three evolution hypotheses

Analysis: In the optimistic scenario, the variable rate saves approximately 18,300 euros compared to the fixed rate. In the pessimistic scenario, the variable rate costs about 26,700 euros more. The difference between the maximum savings and the maximum loss is a substantial 45,000 euros: this is why the choice should not be taken lightly.

Try simulating different scenarios with our mortgage payment calculator.

Fixed vs Variable Rate Mortgage: Complete Comparison Table

The Mixed-Rate Mortgage: The Third Option

There is also an intermediate solution: the mixed-rate mortgage. This formula allows you to switch from a fixed rate to a variable rate (or vice versa) at predetermined intervals, typically every 2, 3, or 5 years.

How it works

At the start, you choose fixed or variable. At each contractual deadline, you can decide to change the rate type without additional costs and without having to refinance. The new rate is recalculated based on market conditions at that time.

Advantages of a mixed rate

• Flexibility to adapt to market conditions
• No refinancing costs to change the rate type
• Possibility of starting with a variable rate (lower) and switching to fixed if rates rise

Disadvantages of a mixed rate

• Generally higher spread (the bank protects itself for the flexibility granted)
• Not all banks offer it
• The rate at the time of switching may not be favorable

Which Mortgage to Choose in 2026: A Practical Guide

Here is a decision-making guide based on your personal situation:

Choose a FIXED rate if:

• You have a fixed income (employee, retiree)
• The payment represents more than 30% of your net income
• The mortgage duration is long (over 20 years)
• You cannot tolerate financial uncertainty
• You do not have significant savings to absorb potential payment increases
• It is your primary residence and you have no alternative housing

Choose a VARIABLE rate if:

• You have a high or growing income
• The payment represents less than 20% of your net income
• The duration is short to medium (10-15 years)
• You have savings that can absorb 30-50% increases in the payment
• You plan to repay the mortgage early
• You are willing to monitor the market and evaluate refinancing options

Choose a MIXED rate if:

• You want to start with a variable rate but have a "safety net"
• You foresee changes in your financial situation in the coming years
• You want flexibility without the costs of refinancing

Refinancing: How to Change Your Mind Without Penalties

Remember that in Italy, mortgage refinancing (portability) is free by law (Bersani Law 40/2007). You can transfer your mortgage to another bank with better terms at no notary costs or early repayment penalties. This significantly reduces the risk of a "wrong" choice: if conditions change in a few years, you can always refinance.

Economic Context 2026: ECB Rates

To understand where we stand today, here is a brief overview of the recent evolution of interest rates:

The trend is clearly downward. The ECB began cutting rates in June 2024 and the market expects further gradual reductions in 2026. This makes the current moment potentially favorable for both the fixed rate (IRS declining) and the variable rate (Euribor falling with expectations of further cuts).

FAQ: Frequently Asked Questions About Mortgages

How much does the spread affect the total mortgage cost?

A great deal. On a 150,000 euro mortgage over 25 years, a spread difference of 0.30% translates to approximately 6,000-7,000 euros in additional interest over the entire duration. Always compare multiple quotes and negotiate the spread with the bank.

Is it true that the variable rate always works out cheaper in the long run?

Historically, looking at the last 30 years in Europe, those who chose the variable rate have often paid less overall. However, past results do not guarantee future ones, and there were periods (2022-2024) when the variable rate cost much more than the fixed rate taken out a few years earlier.

Can I switch from a variable to a fixed rate without refinancing?

Only if your contract explicitly provides for the switching option (mixed-rate mortgage or with a switch clause). Otherwise, the only options are refinancing or renegotiating with your bank.

What is the recommended maximum payment-to-income ratio?

The general rule is not to exceed 30-35% of net household income. For a variable rate, it is prudent to verify that the payment remains sustainable even with a rate increase of 2-3% above the initial rate.

Is it worthwhile to repay the mortgage early?

It depends on the rate. If your mortgage has a high rate (above 3.5-4%) and you have available liquidity, partial early repayment can be advantageous. If the rate is low (below 2.5%), it might be more beneficial to invest that liquidity. Also consider the tax benefit of the mortgage interest deduction for primary residences (19% on interest up to 4,000 euros per year).

What is the APR and why is it more important than the nominal rate?

The nominal rate (TAN) is the pure interest rate. The APR (TAEG - Annual Percentage Rate of Charge) also includes all ancillary costs (processing fees, appraisal, mandatory insurance). The APR is the only indicator that allows you to truly compare the cost of two different mortgages.

Is the fixed rate at a good level in 2026?

With the 20-year IRS at around 2.50% and final fixed rates of 3-3.50%, we are at historically reasonable levels. We are not at the lows of 2020-2021 (when fixed rates below 1% were available), but we are well below the 2023 peaks. If you are considering a purchase, current conditions are decent.