The mortgage rate terms that decide what you pay

What is a posted mortgage rate?

A posted rate is a lender's official sticker price, the rate it advertises publicly and files with the Bank of Canada, and it's one almost nobody actually pays. It matters mainly because some prepayment penalties (the IRD) are calculated from it, so a high posted rate can cost you if you ever break the mortgage early.

What is a special or discounted rate?

A special is the lower rate a lender will actually offer, below its posted rate. It's still a starting point, since an engaged shopper, especially through a broker, usually signs below even the advertised special. The gap between posted, special, and what people actually sign is what this site measures.

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What is the invisible discount?

The invisible discount is the gap between the posted rate and what borrowers actually sign for. In our data it has run roughly 150 to 300 basis points depending on the rate cycle. Lenders don't advertise it because it's discretionary and negotiated case by case.

What is the difference between a fixed and a variable rate?

A fixed rate is locked for the term, so your rate and payment don't move. A variable rate is quoted as the lender's prime rate minus a discount, so it shifts when the Bank of Canada moves prime. Fixed buys certainty; variable has historically cost less over most completed terms, but not the ones where rates spiked.

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What is the prime rate?

The prime rate is the benchmark lenders set variable mortgages against, and it moves in step with the Bank of Canada's policy rate. A variable mortgage quoted as "prime minus 0.90" falls and rises with prime, keeping that discount. Fixed rates instead track the 5-year Government of Canada bond.

What is the difference between the term and the amortization?

The term is how long your current rate and contract last, usually 5 years, after which you renew. The amortization is how long it takes to pay the mortgage off in full, usually 25 years. You'll sign several terms over one amortization, and each renewal is a chance to re-shop the rate.

What does insured, insurable, and uninsurable mean?

Insured (high-ratio) means less than 20% down, so the mortgage carries default insurance, and lenders price these lowest because the loan is the least risky to them. Insurable (conventional) means 20% or more down on a purchase that still meets insurance rules. Uninsurable means the loan can't be insured at all, typically a refinance, a rental, an amortization over 25 years, or a property over $1.5M, and it carries the highest rates.

What is the IRD (interest rate differential) penalty?

The IRD is the penalty many lenders charge to break a fixed mortgage early. Big banks often calculate it from their posted rates, which can make it several times larger than a monoline lender's penalty on the same balance. It's the part of a mortgage's cost people rarely check until they're leaving, and a big reason the posted rate still matters.

What is a trigger rate?

On a variable mortgage with a fixed payment, the trigger rate is the point where rising rates mean your payment no longer covers the interest. Past it, the unpaid interest is added to your balance. It's why fixed-payment variable holders felt the 2022 rate run even though their payment hadn't changed on paper.

What is a monoline lender?

A monoline lender does mortgages and little else, with no branches or chequing accounts, and usually reaches borrowers through brokers. They often post sharper rates and calculate breakage penalties more gently than the big banks, which is why they show up well in what people actually sign.

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Is cashback on a mortgage free money?

It isn't free money. Comparing matched cells (same month, term, and borrower profile), cashback deals carry a rate about 5 basis points higher than plain ones. The cheque, worth 1 to 5% of the mortgage, is often what makes a switch pencil out, but you pay for it in the rate, so compare your net rate rather than the headline cash.

What is an achievable rate versus an average rate?

An achievable rate is what an engaged shopper can realistically sign for, based on what people like them got. It excludes the many borrowers who take the first offer they're given, and benchmarks you against the achievable rate for your cohort.