Are Interest Rates Going Up and Down at the Same Time? COVID-19

Marci • April 7, 2020

If you’re paying more attention to the Canadian economy due to COVID-19, and it seems like you’re getting mixed messages; that mortgage interest rates are going both up and down at the same time, you’re not that far off. There are a lot of moving parts, and to find clarity, we need to make sure we’re comparing apples to apples, and oranges to oranges.

Let’s begin by acknowledging that not all interest rates are the same. The term “interest rates” can mean a lot of different things in news story headlines.

The Government “overnight rate” is different from the “qualifying rate”, which is different from the banks “prime rate”, which is different from “variable rates”, which is different from the “discount on a variable rate” which is different from “fixed rates”.

Here’s a list of the different types of mortgage rates, a quick summary of what they are, the direction they’re going, and how they impact you.

Target for the Overnight Rate.

Also known as the policy rate, this is the rate that the Bank of Canada (The Government) controls. When the Bank of Canada changes the Target for the Overnight Rate, this change affects other interest rates in the economy.

Typically there are only eight days in the year for the Bank of Canada to announce if they will change the rate. However, given the recent COVID-19, the Bank of Canada has made special announcements.

The overnight rate was set with a target of 1.75% for a long time before the pandemic.

March 4th 2020, the rate was lowered to 1.25%. March 16th 2020, the rate was lowered to 0.75% in an emergency rate cut. March 27th 2020, the rate was lowered to 0.25% in a second emergency rate cut.

The overnight rate now sits at 0.25% with April 15th 2020, as the next scheduled announcement date.

By cutting interest rates, the government hopes to stimulate economic growth. Lower financing costs encourages borrowing and investing, which is what our government believes will get us through this pandemic.

Qualifying Rate

Also known as the Benchmark Qualifying Rate or the five year qualifying posted rate, this is another rate set by the government. If you’re getting an insured mortgage, the government wants to make sure you will be able to afford your mortgage at the end of your term (in case interest rates go up). So they make you qualify for your mortgage at a higher rate than you will actually be paying.

The government has recently dropped the qualifying rate from 5.19% to 5.04%. This decrease, like the drop in the overnight rate, is meant to help stimulate the economy. The average Canadian will qualify to borrow an additional $10,000 with this drop.

Banks Prime Rate

The banks prime lending rate isn’t the same as the overnight rate; however, the banks prime lending rate is impacted by the overnight rate. Each bank sets its own prime lending rate. When the Bank of Canada moves the overnight rate, typically the prime rate at each bank will follow.

Because of the emergency rate cut on March 27th, banks lowered their prime lending rate to 2.45%. Some banks moved immediately, while some made the change effective April 1st, which means the savings will be seen on May 1st, but they all did lower their prime rates.

The prime lending rate is used by banks to determine rates on floating mortgage products (like the variable rate), lines of credit, home equity lines of credit (HELOC), and some credit cards.

If you currently have a variable rate mortgage or a HELOC, a lower prime rate means that you are now paying less interest on your existing mortgage, this is a good thing.

Variable Rate Mortgage

A variable rate mortgage is a mortgage that fluctuates with the prime lending rate. Typically, the mortgage rate will change with the prime lending rate and includes a “component” or “discount” to the prime rate +/- a specified amount, such as Prime – 0.45%. The lender sets this component to prime.

So, if you have a variable rate mortgage at Prime -0.45%, the rate you’d be paying today (with a prime rate of 2.45%) is 2%.

This is where it gets a little confusing because while the government is trying to stimulate the economy by lowering the overnight rate, banks have followed by lowering their prime rate, but at the same time have increased the component to prime – by the same amount 0.5%.

Although there are immediate savings for existing variable rate mortgage holders, anyone looking to get a new variable rate mortgage will do so at a higher rate than a few weeks ago.

Fixed Rate Mortgage

As its name suggests, a fixed rate mortgage is where your mortgage rate stays the same throughout your term. Your rate isn’t tied to the prime lending rate but rather is unmoved by outside factors. With all the uncertainty in the Canadian economy, lenders have actually been increasing rates for new fixed rate mortgages.

So while the government is doing all they can to keep rates low, why are banks increasing fixed rate mortgages?

Well, banks are in the business of making money, and given that over 2 million Canadians have applied for some kind of assistance to get through COVID-19, the fear is that mortgage delinquency will go up considerably as the coronavirus financially impacts people.

Banks are increasing fixed rates to protect themselves against economic uncertainty.

So what does this mean for you? Well, as everyone’s financial situation is different, it’s impossible to give blanket advice that applies to everyone. But here is some general advice.

Existing Variable Rate Holders

You’re doing well. The recent drop in the banks prime rate to 2.45% has lowered the amount of interest you are paying on your mortgage. You have a discount to prime for the remainder of your term that isn’t currently available in the market. Your mortgage rate is one of the lowest in Canadian history.

As the next announcement by the government will be April 15th 2020, there is a chance your rate could go even lower.

If at this time, you’re considering locking your variable rate into a fixed rate, that would significantly increase the amount of interest you are paying. As fixed rates have increased over the last weeks, this isn’t a good option right now.

The reason you went variable in the first place is the reason you should stay variable at this point. With all the economic uncertainty, the prime rate won’t be going up anytime soon.

Existing Fixed Rate Mortgage Holders

Your fixed rate is set lower than the fixed rates currently being offered. If you break your term now, you will incur a higher penalty. So unless you must make a move, it would probably be best just to stay the course.

Hopefully, fixed rates will go down when the economic uncertainty winds down, and rates will be in a good spot when your term comes up for renewal.

Are you looking for a new mortgage?

The most important thing for you going forward is flexibility. Variable rates are still historically low, and although fixed rate mortgages have gone up over the last weeks, there are many great options, maybe a shorter term is a better fit for you?

The best place to start is to contact me directly so we can go over your financial situation and discuss the best plan for you to move ahead in these uncertain times.

So although it may appear that mortgage interest rates are going both up and down at the same time, understanding what is meant by “interest rates” is crucial. The government is lowering rates to stimulate the economy, while banks are trying to protect themselves against future losses by increasing rates while they can.

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What to Expect in the Closing Process: A Step-by-Step Guide

By Marci Deane • October 8, 2025
You’ve found the right home, your offer’s been accepted, and your financing is approved—congratulations! But before you can pick up the keys and celebrate, there’s one more important stage: the closing process. Closing is the final step in your homebuying journey, where all the paperwork, legal details, and financial transactions come together. It can feel overwhelming if you don’t know what to expect, but with the right preparation, closing can be smooth and stress-free. Here’s a step-by-step guide to help you understand the process. Step 1: Hire a Lawyer or Notary A real estate lawyer (or notary, depending on your province) handles the legal side of closing. They will: Review the purchase agreement and mortgage documents Conduct a title search to confirm the seller has the legal right to sell the property Ensure the mortgage lender is properly registered on the title Handle the transfer of funds between you, the lender, and the seller Your lawyer or notary will be your main point of contact during closing, so choose one you trust and who communicates clearly. Step 2: Finalize Your Mortgage Your lender will send the mortgage instructions directly to your lawyer or notary. At this stage: You’ll provide proof of property insurance (lenders require this before releasing funds) You’ll confirm your down payment and closing costs are available in your lawyer’s trust account The lawyer will prepare all documents for your review and signature Step 3: Pay Closing Costs Closing costs typically range from 1.5% to 4% of the purchase price. These can include: Legal fees Title insurance Land transfer tax (where applicable) Adjustments for property taxes or utilities prepaid by the seller Home inspection or appraisal fees (if not already paid) Your lawyer will provide a final statement of adjustments so you know exactly how much is due on closing day. Step 4: Sign the Paperwork A few days before closing, you’ll meet with your lawyer or notary to sign all the necessary documents, including: Mortgage agreement Title transfer Insurance confirmations Statement of adjustments Bring valid government-issued ID to this appointment. Step 5: Transfer of Funds On the day of closing: Your lender sends the mortgage funds to your lawyer Your lawyer combines these funds with your down payment and pays the seller Legal ownership of the property is transferred into your name The lender is registered on title as a secured creditor Step 6: Get the Keys! Once the paperwork is filed and the funds have cleared, your lawyer will confirm that the transaction is complete. You’ll then get the keys to your new home—officially making it yours. The Bottom Line The closing process is a series of important steps, but with the right team in place, it doesn’t have to be stressful. By working closely with your mortgage professional and lawyer, you’ll have guidance every step of the way—from signing the documents to turning the key in the front door. If you’d like help preparing for the closing process—or want a clear breakdown of your own closing costs— connect with us today.

Stress-Testing Your Mortgage Affordability: Why It Matters

By Marci Deane • October 1, 2025
Buying a home is one of the biggest financial commitments you’ll ever make. That’s why lenders want to be sure you can handle your mortgage payments—not just today, but also if interest rates rise in the future. This is where the mortgage stress test comes in. Many Canadians hear the term but aren’t entirely sure what it means or how it affects them. Let’s break it down in plain language. What Is the Mortgage Stress Test? The stress test is a rule introduced by the federal government that requires all mortgage applicants to qualify at a higher rate than the one they’ll actually pay. Currently, you must qualify at the greater of your contract rate + 2% or the benchmark qualifying rate (set by the Office of the Superintendent of Financial Institutions). For example: If your lender offers you a 5-year fixed mortgage at 5.25%, you must show you could still afford the payments at 7.25% . Even if rates don’t rise that high, the stress test ensures you won’t be overextended if they do. Why Does It Matter? The stress test protects both borrowers and lenders by: Preventing over-borrowing : It ensures you don’t take on more debt than you can realistically handle. Preparing for rate hikes : With interest rates fluctuating, it’s a safeguard against sudden increases. Strengthening financial stability : It lowers the risk of defaults, protecting the housing market as a whole. While it can sometimes feel like a barrier—reducing the amount you qualify for—it’s ultimately designed to keep you from becoming “house poor.” How Does It Impact Buyers? The stress test can significantly affect your homebuying budget. For example, without it, you might qualify for a $600,000 mortgage, but with the stress test applied, you may only qualify for $500,000. That doesn’t mean your dream of homeownership is out of reach—it just means you may need to adjust expectations or explore other strategies, such as: Increasing your down payment Paying down existing debts Considering alternative lenders who may have different qualification standards Why Work With a Mortgage Professional? Every lender applies the stress test, but not every lender views your application the same way. An independent mortgage professional can: Shop multiple lenders to find the best fit Run affordability scenarios at different rates Help you understand how much house you can truly afford—without stretching your finances too thin The Bottom Line The mortgage stress test isn’t meant to stop you from buying a home—it’s there to protect you from financial strain down the road. By understanding how it works and planning ahead, you can make smarter choices and buy with confidence. If you’re thinking about purchasing a home, refinancing, or simply want to know how the stress test affects your options, connect with us today. We’ll help you stress-test your budget and find the mortgage solution that works best for you.

What To Do If You Have Missed A Payment

By Marci Deane • September 24, 2025
If you’ve missed a payment on your credit card or line of credit and you’re wondering how to handle things and if this will impact your creditworthiness down the road, this article is for you. But before we get started, if you have an overdue balance on any of your credit cards at this exact moment, go, make the minimum payment right now. Seriously, log in to your internet banking and make the minimum payment. The rest can wait. Here’s the good news, if you’ve just missed a payment by a couple of days, you have nothing to worry about. Credit reporting agencies only record when you’ve been 30, 60, and 90 days late on a payment. So, if you got busy and missed your minimum payment due date but made the payment as soon as you realized your error, as long as you haven’t been over 30 days late, it shouldn’t show up as a blemish on your credit report. However, there’s nothing wrong with making sure. You can always call your credit card company and let them know what happened. Let them know that you missed the payment but that you paid it as soon as you could. Keeping in contact with them is the key. By giving them a quick call, if you have a history of timely payments, they might even go ahead and refund the interest that accumulated on the missed payment. You never know unless you ask! Now, if you’re having some cash flow issues, and you’ve been 30, 60, or 90 days late on payments, and you haven’t made the minimum payment, your creditworthiness has probably taken a hit. The best thing you can do is make all the minimum payments on your accounts as soon as possible. Getting up to date as quickly as possible will mitigate the damage to your credit score. The worst thing you can do is bury your head in the sand and ignore the problem, because it won’t go away. If you cannot make your payments, the best action plan is to contact your lender regularly until you can. They want to work with you! The last thing they want is radio silence on your end. If they haven’t heard from you after repeated missed payments, they might write off your balance as “bad debt” and assign it to a collection agency. Collections and bad debts look bad on your credit report. As far as qualifying for a mortgage goes, repeated missed payments will negatively impact your ability to get a mortgage. But once you’re back to making regular payments, the more time that goes by, the better your credit will get. It’s all about timing. Always try to be as current as possible with your payments. So If you plan to buy a property in the next couple of years, it’s never too early to work through your financing, especially if you’ve missed a payment or two in the last couple of years and you’re unsure of where you stand with your credit. Please connect directly; it would be a pleasure to walk through your mortgage application and credit report. Let’s look and see exactly where you stand and what steps you need to take to qualify for a mortgage.