The Ultimate Guide to Mortgage Rates in Canada

The mortgage process can be complex, with ever-changing economic conditions and lots of new terminology to learn. That complexity is why, in the excitement of buying your first home, it’s more tempting to think about what your dream home looks like than planning how to get the best mortgage rate possible.

We want to help guide you so that you feel confident when you sign your first mortgage. We’ll break down some major mortgage topics, especially those that help you save money on your mortgage.

On this Page

• Current Prime Rate in Canada


• What is a Mortgage?


• The Effect of Mortgage Rates on Your Mortgage Payments


• Understanding Your Mortgage Rate


• Fixed Rate Mortgages vs. Adjustable Rate Mortgages


• Mortgage Payment Calculator


• Factors to Consider When Looking for the Best Mortgage Rate


• Choosing the Right MCAP Mortgage for You


• Benefits of an MCAP Mortgage


• Working with a Broker to Get the Best Mortgage Rates


• Mortgage Resources

Current Prime Rate in Canada

What is a Mortgage?

If you dream of owning a home but can’t afford the full cost, a mortgage is essential for making that dream come true. A mortgage is a loan that enables you to buy a home or property, and it’s typically the largest loan you’ll ever receive.

Lenders like banks, credit unions, or mortgage finance companies provide a mortgage loan. It is typically paid off over many years, which is known as the amortization period. A mortgage is a secured loan, meaning that your property is used as collateral for the loan. Now that you know what a mortgage is, let’s talk about your mortgage payment.

The Effect of Mortgage Rates on Your Mortgage Payments

Regardless of your mortgage, every payment you make will comprise of two primary components: the principal and interest. You may be familiar with these terms from other loans like student loans or car loans. But, just in case, here is a refresher:

• Your principal is the amount you borrowed to buy your home. As your mortgage payments are made, the principal is reduced


• The interest is what your mortgage provider charges for lending you the money. Interest is calculated as a certain percentage of the total mortgage loan

Every mortgage payment you make goes towards covering a portion of the principal and interest.

How Are Mortgage Payments Calculated?

Mortgage payments are calculated using a formula considering the loan amount, interest rate, and loan term. That does not include additional costs such as property taxes, insurance, or mortgage insurance premiums. Understand the full scope of what you can afford by using our mortgage payment calculator.

Understanding Your Mortgage Rate

Though there are many mortgage options in Canada, there are two types of mortgage rates to choose from: fixed rate mortgages and variable / adjustable rate mortgages. Note: the MCAP adjustable rate mortgage uses a variable rate – the term “adjustable rate mortgage” will be used throughout this page.

Before understanding the difference between the two, understanding how mortgage rates are set across Canada is an essential starting point.

The primary tool the Bank of Canada uses to control inflation is the overnight rate (also called the policy interest rate). This rate sets the interest rates in the Canadian economy, including mortgage rates.

If the economy struggles to grow, the Bank of Canada may lower the prime rate. This shift hopefully stimulates the economy by lowering borrowing rates, giving Canadians more money to spend.

On the other hand, if the economy is growing too fast, they may raise the policy rate, increasing interest rates for people and businesses. The hope is that this will discourage borrowing, reduce spending, and lower inflation.

The prime rate in Canada shows some patterns and trends throughout its history. It’s important to consider that various factors influence these patterns and trends, including domestic and global economic conditions, government policies, and financial market dynamics.

Understanding the impact of the Bank of Canada on interest rates will help in your understanding of fixed-rate and adjustable rate mortgages.

Fixed Rate Mortgages vs. Adjustable Rate Mortgages

Odds are that your mortgage will be the most significant loan you take out in your life. That makes finding the best rate essential. Unlike other loans you may have experienced, there is a choice when it comes to the type of interest rate: fixed or variable.

Not All Variable Rate Mortgages Are the Same

As you’re looking into the mortgage options available, you may notice a few differences among variable rate mortgages. One option provided by some lenders is a variable rate mortgage with fixed payments. With this type of product, your mortgage interest rate will vary with rate changes in the market, but your payment remains fixed for the entire mortgage term. If interest rates go up, less of your payment will go towards the principal and more will go towards the interest. In contrast, if rates go down, then more of your payment is going towards the principal and less to the interest. Depending on how the rates change, the length or amortization of your mortgage may be extended.

For variable rate mortgages with adjustable payments, the amortization will stay the same because the payments are being adjusted as the rates change. The amortization is the length of time that it will take to repay the mortgage in full, including interest. The same amount is going towards the principal, so your mortgage is paid off according to your expected timeline. This type of mortgage is called an adjustable rate mortgage.

Read more about mortgages with variable rates here.

Understanding these two types of mortgage rates is essential in getting the best mortgage rate that works for your financial needs.

How Does a Fixed Rate Mortgage Work? You may have assumed this from the name, but a fixed rate mortgage is, well, fixed. The interest rate does not change for the duration of your mortgage term. The rate is set for the entirety of the term and is not impacted by market fluctuations. Your amortization period will be broken up into multiple terms, and each term will provide you the opportunity to negotiate a new interest rate. The primary benefit of a fixed rate mortgage is that you have consistent payments for the term of your mortgage regardless of any changes to interest rates set by the Bank of Canada.

How Does an Adjustable Rate Mortgage Work? As mentioned above, the Bank of Canada sets interest rates primarily through its key policy rate. This fact is essential to know for understanding adjustable rate mortgages. That’s because an adjustable rate mortgage has a variable interest rate where both the mortgage rate (and payment amount) may go up or down with the rise and fall of interest rates set by the Bank of Canada. With adjustable rate mortgages, if the interest rates go up or down, your payments will follow the same trend giving you the potential to save on your monthly expenses.

Fixed or Adjustable Rate: Which One Gets Me the Best Mortgage Rate?

Now that you understand the difference between fixed rate mortgages and adjustable rate mortgages, you’re probably thinking about which one is best for you.

Here are two profiles that may help you determine which option suits your needs better.

Fixed Rate Profile I like having predictable payments that fit my budget. It’s great that my mortgage is simple, with no guesswork. Payment stability is something I value, especially in an increasing rate environment. I plan on staying in my home for a long time and can handle paying off my mortgage at a steady pace.

Adjustable Rate Profile I have some flexibility in my finances and am comfortable with payment fluctuations if it means I can potentially save money and get the best interest rate. I feel savvy enough to take a closer look at the details. Paying my mortgage down faster is important to me. I may be moving in the future and the opportunity to save money in interest costs is important to me.

Of course, these are opposite ends of the spectrum, but if you find yourself nodding along to one more than the other, you may have your answer on whether a fixed or adjustable rate is better for you. Talking to a professional mortgage broker may help you make your decision.

Mortgage Payment Calculator

Now that you are armed with a whole host of new terms and a fresh understanding of what makes up your mortgage payments, use our mortgage calculator to compare different mortgage options.

Factors to Consider When Looking for the Best Mortgage Rate

Whether to choose a fixed or adjustable rate mortgage is just one crucial consideration in getting the best mortgage rate. There are many other factors to consider. Here are some other mortgage options available, with details on how they may influence your path to getting the best mortgage rate.

Conventional vs. High Ratio Mortgages

When you decide to buy a home, you’ll need to make an initial lump sum payment called a down payment. The minimum down payment required depends on the home’s purchase price and typically ranges from 5 to 20 percent of the home’s worth. If your down payment is 20 percent or more of the purchase price, your mortgage is considered a low ratio or conventional mortgage. However, you’ll qualify for a high ratio mortgage if your down payment is less than 20 percent. With a high ratio mortgage, lenders require borrowers to have mortgage default insurance.

Convertible Mortgage

A convertible mortgage can be an excellent option for homeowners who prioritize flexibility. With this type of mortgage, you can initially choose either a fixed or variable rate and convert to a different mortgage type at any time without incurring any penalty. Typically, convertible mortgages are short-term with higher interest rates, with six months being the most common duration. This mortgage allows homeowners to take advantage of better rates in the future if circumstances change.

Choosing the Right MCAP Mortgage for You

We’re here to offer you a mortgage solution that fits your unique financial goals and priorities while working to get you the best mortgage rate possible.

You may prefer the predictability of a fixed rate, the potential savings of an adjustable rate, or the flexibility of a combined loan product (a mortgage and a line of credit). Whatever your preference, we have a mortgage option that will work for you.

Take a look at our mortgage offerings, and talk to a mortgage broker about what works best for you.

Benefits of an MCAP Mortgage

When choosing a mortgage lender, thinking beyond just the interest rates is essential. To find the best mortgage for you, be sure to also consider the products, terms, fees, and overall customer experience. At MCAP, we have a team to help you navigate the mortgage market and find the best mortgage solution for your specific circumstances. Here’s what sets MCAP apart:

Working with a Broker to Get the Best Mortgage Rates

So far, most of the strategies we’ve discussed about getting the best mortgage rate have been about what you can do. But is there someone who can help? There is a professional who can guide you through the landscape of loan options, terms, and terminology: a mortgage broker.

A mortgage broker is a licensed professional who recommends the best mortgage options for you. They can guide you through the mortgage process and provide expert advice along every step of your journey. With extensive product knowledge, a broker can help you determine what type of mortgage will suit your needs, educating you as they take you through this important and complex transaction.

How Can a Mortgage Broker Help Me Get The Best Mortgage Rate?

Mortgage brokers can survey the market and provide you with a mortgage that suits your needs, whether that’s a fixed rate, adjustable rate, open, closed, insured or conventional mortgage.

If you want to find competitive interest rates and favourable terms that can save you money on your mortgage, a mortgage broker is ready to help you.

Learn More About Mortgages in Canada by Discovering Our Resources