Before we answer that question, it's important to understand the difference between a fixed rate mortgage and a variable rate mortgage.
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A fixed rate mortgage is a mortgage where the rate of interest and payment are fixed for a specific period of time. Generally known as the mortgage term, it usually ranges from between 6 months and 10 years. As time goes on, more of the mortgage payment goes towards the principal and less of the payment goes to the interest.

A variable rate mortgage is a mortgage where the interest rate fluctuates with any changes in the lenders prime rate. If interest rates go down, your mortgage rate and payment will go down, but if rates go up, your payment also goes up. With some variable rate mortgages you can fix the payment and as long as rates stay below your required payment it will not change. If rates rise high enough that you are not covering the necessary payment, your payment will be increased.

Determining which one is better is as simple as looking at your ability to handle risk and a fluctuation in mortgage payments.

Here's an easy test...
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​If you would loose sleep worrying about the possibility of a .25% increase in the interest rate, or get stressed thinking about the impact on your monthly budget if your mortgage payment changes, then a fixed rate mortgage is probably for you. You should also take the same test when choosing the length of your mortgage term. If you breath easier knowing that your mortgage payment is fixed for the next 5 years then a 5 year term is right for you.

It's pretty simple, if you don't like risk, then a longer fixed rate mortgage term is likely best for you.

Now if risk and payment fluctuations are not as much of an issue for you, then a variable rate mortgage may be the way to go.

Here's why..

Based on a detailed study completed by Moshe Arye Milevsky on interest rates from 1950 to 2000, consumers were better off, on average, financing a mortgage with a variable rate, compared to a long term fixed rate mortgage. A consumer with a $100,000 mortgage and an amortization period of 15 years would have paid $22,000 more in interest payments by borrowing and then renewing at the 5 year rate as opposed to borrowing at prime and renewing annually.

Article by Moshe Arye Milevsky.

The bottom line: Long term stability has a price, but if you can't sleep, what good is the money?