Sponsored by Northwood Mortgage Ltd. License #10349


Like a beach tide, interest rates ebb and flow. They can drop or climb depending on the state of our economy. For many Canadians, they don’t care about rising or falling interest rates and wish to have a steady interest rate for their mortgage term. Other Canadians want to take advantage of the possibility of a rate drop. For these borrowers there is the variable rate mortgage.

What Is a Variable Rate Mortgage?

A variable rate mortgage is a loan in which the interest rate varies for the length of your term. This type of mortgage fluctuates with the prime lending rate. This is the rate at which Canadian banks lend funds to their best clients. The prime rate is set by the Bank of Canada.

How Does The Bank Of Canada Decide What The Prime Rate Will Be?

The Bank of Canada plays close attention to our country’s economic conditions such as the rate of employment, and the impact of the manufacturing and export industry. These factors shape the inflation rate and the Bank of Canada adjusts the prime rate accordingly. If our economy is under-stimulated (high inflation), the prime rate will increase. On the opposite end of the spectrum, if our economy becomes over-stimulated, the Bank of Canada will lower the prime rate to make borrowing more accessible.

Why Do People Choose Variable Rate Mortgages?

Variable rate mortgages provide borrowers with many advantages. For instance, this type of mortgage gives you more flexibility when it comes to payment options. Furthermore, variable rate mortgages allow you to potentially pay off your interest premiums quicker, especially if rates are low.

How Are The Payments Set Up For A Variable Rate Mortgage?

For variable rate mortgages you have two options for your monthly payments. You can choose a fixed payment, which is a set payment with the interest part fluctuating as rates change. This is beneficial if interest rates go down because most of the payment will go towards reducing your mortgage’s principal (the outstanding balance of your loan). For the second option you can have a fixed sum applied to the principal with the fluctuating interest portion altering the complete mortgage payment. This is referred to as a floating payment because your payments increase and decrease based on interest rate variations.

Should I Take Out a Variable Rate Mortgage?

Before you make any financial decisions regarding your current or future mortgage, meet with a broker. A mortgage broker can advise you on whether or not you should go with a variable rate mortgage or take out a fixed rate one.


Canada’s mortgage website

Your home is your most valuable asset. It is probably the single largest investment you will make in your lifetime. Your home is more than a place to rest your head and raise a family. Your home contains equity. It is a treasured resource and in some cases, can even be used as an ATM (aka cash back mortgages and HELOCs – don’t worry we’ll get there).

We All Need a Mortgage

Everyone who is looking to purchase a home will need a mortgage. But, what is a mortgage exactly and why do you need it? Besides being the term to describe a loan secured by real estate, a mortgage allows you to access funding to procure your dream home.

Mortgage Blog

Why Should We Have Mortgage Loan...

If you want to buy a home, but are unable to put down a minimum down payment of 20% then you will need mortgage loan insurance. Read More

Why Do Mortgage Penalties Matter?

If you are thinking of buying your first home then you are likely not thinking of mortgage penalties. Read More

How to Reduce Mortgage Penalties

When you sign on the dotted line of a mortgage agreement, you do so with the hope that this transaction will ultimately be very beneficial... Read More

Understanding the Mortgages...

We always advise first-time home buyers explore their mortgage options before they do anything else. Read More

people a month

Trust us to help them save money
and make better financial decisions.

Join the monthly newsletter for financial tips, news, and deals!

Mortgage Reminder

Enter Your Renewal Date:

Please select the Square and click the SUBMIT button.

Northwood Mortgage

We're working harder for you