Canadian interest rates are soaring, and that has a lot of focus on variable rate borrowers. National Bank of Canada (NBF) economists feel it’s an overhyped media narrative though. The bank ran the numbers for “trigger rates” — the point where variable payments rise in cost. Their estimates show its unlikely rates will rise enough to hit the trigger level.
Canadian Variable Rate Mortgages Don’t Often See Payments Rise
A variable rate mortgage is one where the cost of interest isn’t fixed, but changes with the market. While the cost of interest can rise or fall, borrowers don’t often see their payment change. In Canada, they typically continue to pay the same and more or less goes to principal, depending on rates.
There’s a relatively rare exception that can force a renegotiation — the trigger rate. Lenders and borrowers agree that if interest rises too sharply,…