Fixed

vs

Variable

3 months Interest or IRD (Interest Rate Differential Penalty (whichever is higher)

Locked in for Term Chosen
Rate and Payments won't change

Cannot change rate during term

Rates are determined and impacted by the Canada Bond Yields
See graph below to see historic rates

Terms Available
1, 2, 3, 4, 5, 7, 10yr Terms

3 months Interest 
Penalty

Rate fluctuates with the Prime Rate
Payments will rise and fall with rate change 

Can lock-in to a Fixed Rate at any time
Must choose from the fixed rates available at that time

Rates are determined and impacted by the Bank of Canada
See graph below to see historic rates

Terms Available
5yr Term

 

How to calculate your Penalty 

Three Months of Interest 

Step 1

A

Amount you are paying out

Step 2

B

Your current Interest Rate expressed as a decimal (ie.3.25% = .0325)

Step 3

C

A x B = C

Step 4

D

C / 4 = D, D is the estimated Three Months Interest Cost

Step 5

E

D + Reinvestment Fee (if applicable) = E, E is your estimated Early Payout Penalty

IRD - Interest Rate Differential

Step 1

A

Interest Rate on your Mortgage

Step 2

B

Current best interest rate available with your lender with a comparable remaining term

Step 3

C

A - B = C, which is the difference between your rate and current rates available

Step 4

D

Amount you are paying out

Step 5

E

Number of months remaining in the term of your mortgage

Step 6

F

(C x D x E)  / 12 = F, F is the estimated Interest Rate Differential Amount

Step 7

G

F + Reinvestment Fee (if applicable) = G, G is your estimated Early Payout Penalty

**This penalty calculation may differ from the way some banks calculate their penalty so it is always important to 
contact us directly to get a quote on your penalty. 

 

 
shutterstock_1143683663.jpg

Changes since 2010

May 31 2010
July 19 2010
Sept 7 2010
Jan 20 2015
July 14 2015
July 11 2017
Sept 5 2017
Jan 16 2018
July 10 2018
Oct 23 2018
Mar 3 2020
Mar 15 2020
Mar 26 2020

+ 0.25%
+ 0.25%
+ 0.25%
- 0.25%
- 0.25%
+ 0.25%
+ 0.25%
+ 0.25%
+ 0.25%
+ 0.25%
- 0.50%
- 0.50%
- 0.50%

Schedule for 2022

Jan 26 2022
Mar 2 2022
Apr 13 2022
Jun 1 2022
Jul 13 2022
Sep 7 2022
Oct 26 2022
Dec 7 2022

No Change

Bank of Canada
Directly impacts Variable Rate Mortgages

+ 0.25%

+ 0.50%

+ 0.50%

+ 1.00%

 

History on Rates

5yr Fixed vs Variable Mortgage Rates from 2006 - Today

FixedVariableHistory.webp

5yr Fixed Rates vs
5yr Bond Yields 2000 - Today

5YearFixedRatesandBondYields.webp

Historic Prime Lending Rates from 1935 - Today

HistoricalPrimeLending.webp

source: Ratehub.ca

The Beginnings of Canada's Central Bank in 1935

The Bank of Canada was created as part of the Bank of Canada Act in 1935. It was recommended by the Royal Commission in response to the economic conditions of the Great Depression. In March 1935, the Bank of Canada was opened to the public as a private institution with shares sold to public investors. It was quickly nationalized as a public institution by an amendment to the Bank of Canada Act in 1938.

1977 - 1991: Stagflation

After the upward change in 1955, the Bank of Canada rate continued to rise slowly throughout the 1960s and early 1970s. In October 1978, the benchmark rate hit double digits for the first time at 10.25%. This was due in part to the global oil crisis and the OPEC oil embargo. With record-high prices for oil in August 1980 that continued into 1981, the Bank of Canada rate hit an all-time high of 20.03% in August 1981. The lowest rate reached during this period was 7.14% (March 1987).

1935 - 1945: The Great Depression and World War II

The Bank of Canada rate (not officially the target overnight rate until much later in the century) started at 2.5% in 1935 and ended at 1.5% in 1945. The economy strengthened during the war as Canada played a vital role in supplying natural and manufactured resources to the Allies. There was also increased employment, especially of women. The decrease in the Bank of Canada rate encouraged people and businesses to borrow money to invest in new manufacturing plants and housing.

1991 - 2008: Economic Recovery

After the recession of the 1980s, the Bank of Canada rate between 1991 – 2009 generally went downwards with only a few exceptions. The inflation-target rate was introduced at the beginning of this period.

1945 - 1955: The Post-War Period

After World War II, the Bank of Canada rate did not rise until October 1955, when it was changed to 2.0%. This low-interest rate environment promoted investment in new infrastructure, manufacturing, housing and consumer goods.

2009 - 2017: The Great Financial Crisis

In March 2009, the BOC rate dipped below 1% for the first time to 0.5% in response to the Great Financial Crisis. Despite a minor recovery, in 2014, oil prices dropped a staggering 60%, causing a recession in Canada's oil-driven export economy. The Bank of Canada rate then dropped from 1.25% to 0.75% in 2015.

2018-2021: Low to High Inflation and COVID-19

Despite widespread economic growth, 2018 and 2019 were marked by continued low inflation, preventing the Bank of Canada from raising rates any higher than 1.75%. This was quickly reversed with the impact of COVID-19 with a 1.50% decrease in March 2020. The Bank of Canada rate now lies near its lower limit at 0.25%. They were unlikely to be raised anytime soon due to the deflationary impact of reduced consumer spending and distressed economy. However with the increase of inflation that may change.

Inflation allows borrowers to pay lenders back with money worth less than when it was originally borrowed, which benefits borrowers. When inflation causes higher prices, the demand for credit increases, raising interest rates, which benefits lenders.

Today’s combination of low mortgage rates and high inflation is exceedingly rare. So one of those conditions is likely to end soon — and if prices remain elevated, economists say, mortgage rates will rise.

source: wowa.ca

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