There has been a lot of discussion recently about how variable-rate mortgage holders could face their “trigger point.” We’re going to explore what that means, and the implications for borrowers.
Let’s first cover the basics. Most variable-rate mortgages have static monthly payments, which protect the borrower’s cash flow from fluctuations in the prime rate. Four of the Big Six banks offer fixed payments for variable-rate mortgages, and so do several credit unions.
But, further Bank of Canada rate increases this fall will likely lead the banks to increase many of these scheduled payments.
This happens when a mortgage’s Trigger Rate and Trigger Point come into play. And 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%
