How to prepare for the increase in Prime Rate in the coming years?

Most of us realize that in the coming years the Prime Rate will increase and the interest of Variable Rate Mortgages will also increase.

How to prepare for this situation? This is a practical question today.

Many ask, is it necessary to switch to a Fixed Rate mortgage from the Variable Rate mortgage?

Let’s analyze a situation with a fixed rate mortgage to find an answer.

On November 11th, I looked through websites of all major banks and checked what Fixed Rate mortgage rates are offered on 5-year terms. It is not always possible to say whether the rate is for a 25 or a 30-year amortization period, as many banks will offer a higher rate on a 30-year amortization. Let’s look at the numbers.

TD is offering a rate of 2.74% on 5 years, CIBC – 2.79%, RBC – 2.94%, BMO – 2.79% with amortization of 25 years, Scotia – only shows a posted rate of 4.79%. We, as agents can offer today, with Scotia, on a 5-year term, a Fixed Rate of 2.79% on a 25-year amortization and 2.89% on a 30-year amortization period.

Many who obtained a mortgage in the last year have a very attractive rate, slightly above 1.5%. Switching to a Fixed Rate mortgage will instantly result in a significant increase in payments, and if the contract is broken over the next 5 years there will be large penalties.

However, many have a variable rate of over 2%, because just until recently the discount on the Prime Rate was not that big, for example, Prime minus 0.4%.

I believe that in such situation, it is important to urgently break the current contract, pay reasonable penalties and obtain a significantly better rate, Prime minus 1% or even lower (this depends on the amount of the mortgage).

I am not sure how long this will continue, but with today’s discount on Prime rate, we can offer a rate of even below 1%.


Of course, this offer does not work in all situations, however there is such possibility and it may disappear in the near future. You can always call and ask what we can offer at this particular time.

Recently, a woman with two mortgages came to me for a consultation. Mortgage on the primary residence that she lives in was 1.7%, mortgage on a rental condo was 2.1%. We did the math and decided to redo both mortgages. Breaking a mortgage contract on the condo she would pay just around $2,000 in penalties, the benefit over the next 4 years amounts to $8,000. The 1.7% mortgage will be changed as well, even though the benefits are not as great, she will have a lower Variable Rate mortgage, which will allow for a longer time before she has to worry about increase in interest rates.

How to understand what is more beneficial – 1.3% Variable Rate mortgage or a 2.79% Fixed rate mortgage?

In order to surpass the Fixed Rate of 2.79% offered by the bank, the Bank of Canada would have to increase the overnight lending rate a total of 7 times. The dates of starting to increase rates have already been moved from the end of 2022 to the summer of the next year, or maybe even earlier, so it is not important how long it will take the Bank of Canada to increase the rates 7 times, definitely not in one year as it would have a major impact on the economy.

This is just bringing the rates to par; this is not a losing scenario yet. In order to start losing, it would be necessary for the Bank of Canada to continue to increase the rate even further. On top of that, to really lose what we will gain over the near future the rate would have to be increased another 7 times. So when will this happen and will it happen at all?

Not too long ago I calculated the penalties at TD bank with the Variable Rate and the Fixed rate mortgages: the Variable Rate mortgage penalty was around $2,000 and the Fixed Rate mortgage penalty was around $12,000.

Many want to switch to Fixed Rate mortgage as they have fear that there will be a sudden rate increase and they would not be able to afford the payments. We can offer a Variable Rate mortgage with a condition that your payments will not increase through the whole 5 years.

Call us and ask for Inna, provide your mortgage details, we will do all the necessary calculations and respond to you in writing.

You can send the request to her e-mail

We work with Lender A, Lender B, with Stress Test, without Stress Test, with Credit Unions, with verifiable income and with gross business income, with families with no income, but owning other properties etc. There are different situations, but there is always a way to obtain a mortgage.

Another important detail, even if you do not want to change anything or you do not need any changes, please pay attention to the special “Manage Your Mortgage” program on our website in the “Mortgage” section. Reading the article on the website will explain to you why the benefits of this program can be very significant.

Registration does not assume any obligations on your behalf, we on the other hand will help you obtain the best mortgage rate, that will be available on the market within the four months of your renewal date.