The cost of variable-rate mortgages in Canada has risen in line with the Bank of Canada’s latest rate hike, but experts warn that increases for new loans and renewals could outpace future central bank hikes.
As of Thursday afternoon, the lowest advertised rate for a five-year variable mortgage on Ratehub.ca climbed to 3.66 per cent from 3.41 per cent last week, matching the Bank of Canada’s 25-basis-point increase on Wednesday.
Victor Tran, an Ontario-based mortgage broker, noted that advertised variable rates could rise faster than the Bank of Canada’s headline interest rate in the coming months. This is because lenders typically reduce the discount they offer on their prime rate as interest rates increase. The last time this occurred was in 2022, when both fixed and variable rates were climbing rapidly.
Ratehub.ca shows that the best discounts from a bank’s prime rate are roughly one percentage point for a five-year variable mortgage at 3.66 per cent. This rate is about 80 basis points cheaper than a five-year fixed mortgage. The discount a lender offers can vary widely based on factors such as the mortgage balance, whether the loan is insured, and whether it’s for a primary residence or a rental property.