Most variable rate mortgages have static monthly payments, which protect the borrower’s cash flow from changes to the Prime Rate. Four of the big six banks offer this, and so do several credit unions.

But further Bank of Canada rate increases this Fall will lead these banks to increase many of these scheduled payments.

This happens when a mortgage’s Trigger Rate and Trigger Point come into play. Here you will find a complete explanation and discussion of trigger rate and trigger point.

With the next Bank of Canada overnight rate announcement coming up on September 7, 2022 it is quite possible your static payment variable rate mortgage might hit the “Trigger Rate.”

Breaking News – Impact of September 7, 2022 Bank of Canada Rate Hike

If you exceed your personal Trigger Rate, to avoid your mortgage balance owing increasing, the bank will notify you. They typically recommend customers increase the mortgage payment or convert to a fixed rate mortgage to avoid reaching the Trigger Point (defined below). However, no action is required by the customer (and/or cosigner) at this time.

What is my Personal Trigger Rate?

Here is a simple calculator which will approximate your personal trigger rate. This is the first and only free such calculator in Canada. Please note this is not intended as a basis for financial decisions. It’s best you contact your financial institution to confirm your personal trigger rate. The calculation methodology was generously provided by Frances Hinojosa, Tribe Financial Group.

If you want to understand all your options, please contact us.

When interest rates increase to the point that regular principal and interest payment no longer covers the interest charged, interest is deferred, and the principal balance (total cost) can increase until it hits the Trigger Point.

Trigger Point is when the outstanding principal amount (including any deferred interest) exceeds the original principal amount.

It’s most likely to happen first to variable rate mortgages arranged between the Spring of 2020 and early March 2022 when the Prime Rate was only 2.45%.