The Impact of Interest Rate Changes on Your Mortgage

Interest rates are more than just numbers on the news — they directly affect your monthly payments, your total interest over time, and in many cases, your ability to qualify for the mortgage you want. Whether you’re a first-time buyer, renewing soon, or thinking about refinancing, understanding how interest rate changes impact your mortgage is key to staying in control of your finances.

Let’s break it down in a simple, practical way.

Why Do Interest Rates Change?

The Bank of Canada sets a benchmark rate called the overnight rate. When inflation rises or the economy overheats, they often increase rates to cool things down. When growth slows or recession looms, they lower rates to stimulate borrowing and spending.

Lenders use this benchmark to set their prime rate, which then influences the rates you’re offered on variable and fixed-rate mortgages.

How Interest Rate Changes Affect Your Mortgage

1. Variable-Rate Mortgage Holders

If you’re in a variable-rate mortgage, changes hit you more directly.

When rates go up, your monthly payment increases (if you have an adjustable-payment mortgage), or more of your payment goes toward interest and less toward the principal (if you have fixed payments).
When rates go down, you pay less interest, and more of your payment goes toward reducing your balance.

Let’s say you have a $500,000 variable-rate mortgage at 5.5%, amortized over 25 years. If the rate increases by 1%, your payment could jump by roughly $270–$300 per month. That’s a significant shift in household budgeting.

2. Fixed-Rate Mortgage Holders

If you’ve locked in your rate, you’re shielded from immediate changes — but only until your term ends.

Here’s what to watch for:

If rates have risen by the time you renew, your next term could come with higher payments.
If rates have dropped, you may have a chance to renew or refinance at a lower rate — potentially saving thousands.

This is why planning ahead of renewal time is so important. Start reviewing your options at least 4–6 months before your term ends.

3. New Home Buyers or Those Renewing Soon

Interest rates also affect your mortgage qualification. In Canada, the stress test requires you to qualify at the higher of:

The Bank of Canada’s benchmark rate (currently around 5.25%)
Or your contract rate + 2%

So, if the market rate jumps from 4.5% to 5.5%, suddenly your qualifying rate moves from 6.5% to 7.5%, reducing how much you can borrow. A 1% rise in rates can slash your affordability by up to 10%.

What You Can Do About It

If you’re currently in a variable rate: Stay in close touch with your mortgage broker. If rates are expected to keep climbing and your budget is tight, you may want to explore locking into a fixed rate.
If you’re renewing soon: Don’t just accept the renewal offer from your lender. Shop around or work with a broker who can compare dozens of lenders for you — you might find a better rate or term.
If you’re buying a home: Ask about getting a rate hold — some lenders can lock in today’s rate for up to 120 days, giving you a buffer against future hikes while you shop.

Navigating This Market with a Mortgage Broker

The truth is, you don’t have to time the market perfectly. What matters more is having a plan that matches your financial comfort zone.

At Anton Mortgage, we help you understand what rising or falling rates mean for your specific situation. Whether it’s restructuring your mortgage, choosing the right term, or helping you qualify in a high-rate environment, we’re here to guide you through it.

We work with over 60 lenders across Canada, giving you access to a range of competitive options — from major banks to alternative lenders — all tailored to your needs.

Want to know how today’s rates impact your mortgage?

Let’s talk about your numbers, your goals, and your best next step. Contact us here.

Your mortgage should adapt as the market does — and we’ll help you stay ahead of it.