Interest rate increases – Are we done yet?

Tracy Head • November 7, 2022

While many in the mortgage world anticipated rates to increase this year, I don’t think anyone expected them to increase so much and so quickly.


What we’ve seen is unprecedented. If you are in a fixed rate mortgage these rate increases won’t affect you until you reach the end of your current term. At that point you will need to carefully consider where rates are at the time and decide whether you are going to opt for a fixed rate again, and if so for how long.


If you are currently in a variable mortgage there are a couple of things that may be happening for you right now. If you are in an adjustable rate mortgage (ARM), your mortgage payment will have increased as prime has increased. That means that your remaining amortization is still on track.


It likely also means, however, you are starting to feel a pinch when making your mortgage payment. I know, I’m in an ARM and my payment has increased by more than $500 per month since March.


If you are in a variable rate mortgage (VRM), your mortgage payment will have stayed the same despite the rate increases but you are now at a tipping point, where the payment you are making may not even be covering the interest due on your mortgage. That can potentially mean either you are no longer paying down any of the principal balance or the principal balance is increasing.

That means the remaining amortization (length of time to pay off your mortgage) will be increasing as well.


For clients who are in VRMs, they are reaching what is known as the “trigger” rate (the tipping point I mentioned above). Financial institutions are starting to reach out to those clients to make alternate arrangements to make their mortgage payments.


Some of the options presented will likely include:


• Increasing your payment based on the current variable rate to bring the payment back to the point that it is paying down principal again.

• Make a lump sum payment and keep your payment the same.

• Convert to a fixed rate which will be increased to keep your amortization on track.


Whether you are in a VRM or an ARM, the increases to your mortgage payments smart.


Before you consider a knee-jerk reaction of locking into a five-year, fixed term, it is important to ask yourself why you are in a variable mortgage in the first place.


It is also important to do some serious thinking about your plans for the next few years.


While locking in for a longer term may feel attractive after how unsettling this year has been, if you are anticipating any kind of a major change to your life or your financial situation it may be a wise choice to stick with your original plan of the variable mortgage.

I am seeing a fair number of people choosing shorter, fixed terms in anticipation of rates softening again.


As a positive sign, I am starting to see rate specials posted by multiple lenders. This week, my favourite lender dropped its five-year fixed rate (for insured mortgages) from 5.84% to 5.44% and then again to 5.29%.


I think we will see rates drop a bit more before the next rate announcement on Dec. 7.


If you are struggling with the increased payments on your mortgage, I urge you to reach out to your mortgage person as soon as possible.


Lenders do not want to be in the foreclosure business, so most are open to working with their clients to find a solution that provides some relief and stability

Tracy Head

Mortgage Broker

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By Tracy Head • October 15, 2026
When you’re buying a home or renewing your mortgage, choosing a lender is one of the biggest financial decisions you’ll make. Many Canadians start with their bank because it’s familiar. They may have their chequing account, savings, and credit cards all in one place. It seems like the natural place to get a mortgage, too. After years of helping clients find the right mortgage, I’ve learned that the best choice isn’t always the biggest bank. That’s why I often work with monoline lenders to help my clients find a mortgage that fits their needs. What Is a Monoline Lender? A monoline lender is a company that focuses mainly on mortgages. Unlike traditional banks, monoline lenders don’t offer everyday banking services such as chequing accounts, credit cards, or car loans. Instead, they focus on one main job: providing home financing. Many monoline lenders work through mortgage brokers rather than dealing directly with customers. This means I can compare their mortgage options with those of banks and other lenders to help find a suitable fit for each client. You may not recognize the name of a monoline lender, but that doesn’t mean it’s a small or risky operation. Many are well-established companies that serve homeowners across Canada. One of the biggest reasons I work with monoline lenders is their focus on mortgages. Because mortgages are their main business, they often offer competitive interest rates and mortgage features that can be very attractive to borrowers. Even a small difference in your interest rate can make a difference over time. But I always remind my clients that the lowest rate isn’t the only thing that matters. The mortgage also needs to work with their budget, plans, and comfort level. Here are some of the advantages I see when working with monoline lenders: 1. Competitive interest rates Monoline lenders often offer very competitive rates, sometimes lower than those offered by the big banks. This can help reduce borrowing costs over the life of a mortgage. 2. Mortgage terms that put borrowers first Some monoline lenders offer flexible mortgage features, including helpful options for making extra payments or paying off a mortgage early. Their prepayment rules and penalties can also be more favourable than those of some bank mortgages. However, every lender and mortgage product is different, so I always look at the details before making a recommendation. 3. A focus on mortgage service Since monoline lenders specialize in mortgages, their processes and support teams are built around home financing. As a mortgage broker, I work with their lending teams to help move applications forward and deal with questions along the way. 4. More choice for my clients I believe my job is to look beyond the name on the building. By working with different types of lenders, I can compare more options instead of limiting my clients to what one bank offers. That extra choice can be especially helpful for first-time buyers, families renewing their mortgages, and homeowners who want to make the most of their money. Of course, no lender is perfect, and monoline lenders are no exception. One difference is that you generally won’t have a branch to visit for your mortgage. You may need to contact the lender by phone, online, or through your mortgage broker. For people who prefer face-to-face service at their local bank, this can take some getting used to. You also won’t be able to keep your everyday banking and mortgage with the same monoline company. Some people prefer having everything in one place, and that convenience has value. Another important point is that mortgage features can vary widely. Some monoline mortgages have excellent prepayment options, while others may have limits or conditions. Penalties for breaking a mortgage early can also vary, especially with fixed-rate mortgages. That’s why I encourage clients to read the terms carefully and ask questions before signing. A low rate is only a good deal if the mortgage suits your needs. How Do Monoline Lenders Compare With Traditional Banks? Traditional banks have plenty to offer. They provide familiar service, a wide range of financial products, and the convenience of managing several accounts under one roof. Some also offer discounts or benefits when you combine your mortgage with other products. Monoline lenders, on the other hand, focus on mortgages and may offer better rates or more suitable mortgage terms for certain borrowers. Neither option is automatically better. The right choice depends on your financial situation, your plans, and the mortgage details. This is where working with a mortgage broker can make a real difference. We can compare options from different lenders, explain the differences in plain language, and help you understand what you’re agreeing to. My Advice: Look Beyond the Name After years in the mortgage business, I believe that choosing a mortgage should be about more than finding the lowest rate or going with a familiar name. It should be about finding a mortgage that gives you good value, fits your budget, and offers the flexibility you may need in the future. That’s why I often recommend monoline lenders. They give me more options to consider and can provide excellent mortgage solutions for many Canadian homeowners. Most importantly, I want my clients to feel informed and comfortable with their decision. A mortgage is a major commitment, and you deserve to understand your choices before making it. Whether your mortgage is with a major bank, a credit union, or a monoline lender, the goal remains the same: to help you find the right fit for your life, not simply the first option put in front of you. The best mortgage isn’t always the one with the most familiar name. It’s the one that works best for you.
Two people meeting with a consultant at a table, reviewing charts on a laptop in a bright office
By Tracy Head • October 1, 2026
If there’s one mortgage question I’ve heard more times than almost any other, it’s this: “Should I take the variable rate or lock in the fixed?” And honestly, there isn’t a one-size-fits-all answer. Right now it’s a particularly interesting question. For example, a client today might be looking at a variable mortgage around 3.50%, while the comparable fixed-rate option for the same term is approximately 4.45%. That’s a difference of almost a full percentage point. On a $500,000 mortgage, that difference is significant. So why wouldn’t everyone simply take the variable? Because the mortgage decision isn’t really about choosing between two numbers. It’s about deciding how much interest-rate risk you’re comfortable carrying. The case for variable The biggest attraction of a variable mortgage is obvious: you’re starting with the lower rate. At 3.50% versus 4.45%, the variable borrower has a meaningful head start. And unlike a fixed mortgage, where you’re locked into the rate for the term, a variable mortgage moves with the lender’s prime rate. The Bank of Canada influences short-term rates through its policy rate, which in turn affects prime and therefore variable mortgage rates. That creates both an opportunity and a risk. If rates fall, a variable-rate borrower generally benefits relatively quickly. More of the mortgage payment can go toward principal, and the overall interest cost can decline. That’s one reason variable mortgages have historically attracted borrowers who are comfortable with some uncertainty. There’s another advantage that I think is sometimes overlooked: flexibility. Many variable mortgages can be converted into a fixed-rate mortgage during the term. But—and this is important—the exact rules depend on the lender and the mortgage product. For example, some lenders allow a borrower to convert to a fixed rate without a traditional break penalty, provided certain conditions are met. Many lenders say their variable mortgages can generally be converted to a fixed mortgage with a term equal to or longer than the remaining variable term. Other lenders have their own rules. So when I’m arranging a variable mortgage for a client, I don't just ask, “What's the variable rate?” I ask: “What are the conversion rules?” Because a variable mortgage with a good conversion option can be a very different product from one without it. But here's the catch with converting I often hear clients say: “I'll just take the variable now and lock into a fixed rate if rates start going up.” It sounds like the perfect strategy. Unfortunately, mortgage markets don't always make it that easy. The problem is that by the time everyone agrees that rates are going higher, fixed rates may already have moved. That's because variable and fixed mortgages are influenced by different benchmarks. Variable rates are primarily connected to prime and the Bank of Canada’s policy rate. Fixed mortgage rates, meanwhile, are heavily influenced by Government of Canada bond yields and market expectations about future inflation and interest rates. That means fixed rates can move before the Bank of Canada actually changes its overnight rate. So if you wait for the first Bank of Canada rate hike before deciding to convert, you may find that the fixed rate you wanted has already become more expensive. And there’s another consideration: when you convert, you don't necessarily get the same discounted fixed rate that a new mortgage client might be offered. The conversion rate is determined by the lender and the terms of your mortgage. In other words, the ability to convert is valuable, but it isn't a crystal ball. What does history tell us? This is where the conversation gets interesting. Over long periods of Canadian mortgage history, variable rates have frequently been below comparable fixed rates. The Bank of Canada's own research shows just how attractive variable mortgages became in the years leading up to 2022. In 2021 and early 2022, for example, variable mortgage rates were substantially below fixed rates, and variable mortgages represented roughly one-third of outstanding mortgage debt. But then came 2022. The Bank of Canada increased its policy rate rapidly in response to inflation. Variable mortgage rates followed. Suddenly, the borrower who had enjoyed a significant discount over a fixed mortgage was facing much higher payments. That experience is worth remembering because it illustrates the fundamental truth about variable mortgages: The historical advantage of variable isn't a guarantee. There have been periods when variable rates have outperformed fixed rates, and there have been periods when fixed rates have been the better choice. In fact, the recent history gives us a pretty good example of both sides. In 2021, a variable mortgage could be dramatically cheaper than a fixed mortgage. By late 2022 and into 2023, rapidly rising rates turned that relationship upside down. CMHC's historical data shows variable mortgage rates climbing sharply as the Bank of Canada increased its policy rate. Canada Mortgage and Housing Corporation More recently, the relationship has shifted back again. CMHC reports that variable mortgage rates at Canadian chartered banks fell below fixed mortgage rates beginning in the fourth quarter of 2025, marking the first time that had happened since 2022. By February 2026, variable mortgages had become the most common type of newly extended mortgage at chartered banks. That's an important piece of context for today's borrower. So does variable normally win? If you look at the broad historical picture, variable rates have often been lower than fixed rates over extended periods. But I would be very careful about turning that historical observation into a prediction. The reason is simple: we're not borrowing money in the past. We're borrowing it today. And today's starting point matters enormously. If I'm looking at a client with a 3.50% variable option and a 4.45% fixed option, the variable borrower has a 0.95 percentage-point advantage right from the start. The question becomes: How much can rates rise, and for how long, before that initial advantage disappears? That's the calculation I want clients to think about. If the variable rate remains around 3.50% for a while, the borrower has a considerable advantage. If it rises to 4.00%, perhaps the advantage is still there. If it rises to 4.50%, we've essentially eliminated the initial discount compared with today's 4.45% fixed rate. And if it rises substantially above that level and stays there, the fixed-rate borrower may ultimately come out ahead. Of course, that's a simplified illustration. Mortgage payments, amortization, timing and the path of rate changes all matter. But it demonstrates the basic concept. The variable borrower is effectively being paid to accept interest-rate risk. Right now, that payment is the roughly 0.95% discount. The question is whether that discount is enough compensation for the risk you're taking. The biggest mistake isn't choosing fixed. And it isn't choosing variable. It's choosing one without understanding your own tolerance for changing payments. I've had clients who could comfortably handle a payment increasing by several hundred dollars a month. For them, variable can be a reasonable way to pursue a lower starting rate and maintain some flexibility. I've also had clients for whom a $300 or $500 increase in their mortgage payment would create a serious problem. For those borrowers, the value of certainty can be much greater than the potential savings of starting with a lower variable rate. There's nothing wrong with paying a little more for certainty. Think about car insurance. You don't buy insurance because you expect to crash. You buy it because you don't want one bad event to create a financial disaster. A fixed mortgage provides a similar form of certainty. You're effectively saying, “I don't want to worry about where rates are going for the next several years.” That's worth something. There's also a psychological component This doesn't get talked about enough. A variable mortgage can look fantastic when rates are falling. It can look terrible when rates are rising. And human beings aren't particularly good at watching their biggest monthly expense change and then calmly sticking with a long-term strategy. We tend to do the opposite. When rates are low, people want to stay variable. When rates start rising, suddenly everyone wants fixed. And by then, the fixed rate may already have increased. I've seen this cycle repeat. That's why I don't believe the best mortgage strategy is necessarily the one that produces the lowest theoretical interest cost. The best strategy is one that the borrower can actually live with. What I tell my clients When the variable rate is around 3.50% and the comparable fixed rate is around 4.45%, I think it's reasonable to have a serious conversation about variable. That's a meaningful spread—not a tiny difference. But I also want the client to understand exactly what they're buying. They're buying a lower starting rate in exchange for accepting uncertainty. They're accepting that their rate can move. They're accepting that the Bank of Canada can move in a direction they don't like. And they're accepting that converting to fixed later isn't necessarily going to give them the same fixed rate that was available today. On the other hand, the fixed borrower is buying certainty. They know what their rate will be. They know what their mortgage payment will be, subject to the mortgage's specific terms. And they don't have to spend the next few years watching the Bank of Canada. So which one should you choose? After years in the mortgage business, I've learned that this is rarely a question of simply finding the mathematically “right” answer. It's about matching the mortgage to the borrower. If you have strong cash flow, plenty of financial flexibility, and can comfortably absorb higher payments if rates rise, a variable mortgage can be an attractive option—particularly when there's a substantial discount to the comparable fixed rate. If your budget is tight, you value certainty, or the prospect of a significant payment increase would cause financial stress, paying more for a fixed rate may provide valuable protection. And if you're considering variable, don't just ask your broker about the rate. Ask about the conversion rules, prepayment privileges, trigger rate, payment structure and exactly what happens if you decide to lock into a fixed mortgage later. Those details matter. Ultimately, the variable-versus-fixed debate isn't about predicting the Bank of Canada correctly. None of us has that ability. It's about deciding how much interest-rate risk you want to take, what you're being compensated for taking that risk, and whether you can comfortably live with the outcome if rates don't go the way you hope. That's a much more useful way to look at the decision. And in today's market, with roughly a 3.50% variable rate versus a 4.45% fixed rate, it's certainly a conversation worth having.  The historical and current-rate references above are based on Bank of Canada and CMHC data; lender conversion provisions vary by mortgage contract, so the column deliberately avoids presenting conversion as universally identical across lenders.