What’s the impact of a prime rate change?

Learn how a change in the prime rate might affect you and your mortgage.

The Bank of Canada has announced an increase to the overnight rate, which has resulted in a MCAP prime rate increase as of July 13, 2023 to 7.20%.

If you have a adjustable rate mortgage, your rate will change based on the MCAP prime rate. While many homeowners will remain comfortable with their adjustable rate mortgage, others may wish to lock-in to a fixed rate term to avoid further potential rate fluctuations.

It’s easy to lock-in to a fixed rate mortgage

If you currently have a adjustable rate mortgage and you lock-in to a fixed rate term of equal or greater length, there is no cost to you. You also retain the same privilege payment options in a fixed rate term as with your adjustable rate term.

How it works

When you lock-in to a fixed rate mortgage, you start a new term with a new interest rate. This means that your current term – and adjustable interest rate – will come to an end on the date you lock-in. The fixed interest rate for your new term will depend on the fixed rates available for the term length you choose.

Some terms and conditions may change when you convert your adjustable rate mortgage to a fixed rate. Before signing an offer to lock-in your mortgage, it’s a good idea to review the terms and conditions of the new term, including the prepayment penalty information, to make sure you’re fully informed.

To request an offer for the best available 5-year fixed rate, log into MyMCAP and select “Lock-in to a Fixed Rate”

Conversions/Lock Ins FAQ

When you lock in, you start a new term, with a new interest rate. This means that your current term, and adjustable interest rate, will come to an end on the date of your lock in. The fixed interest rate for your new term will be determined based on the fixed rates available for the term length you choose, at the time you choose to lock in.

A fixed interest rate gives you the security of knowing your payment amount will remain unchanged for the length of your term, regardless of changes in the market. This security is typically accompanied with a higher interest rate. A adjustable rate, on the other hand, can often be lower than fixed rates, but it comes with a risk of fluctuations in your rate, and therefore your payment amount, over the length of the term. Whether or not the risk of payment fluctuation is worth the potential for lower payments is up to each individual homeowner; there is no right or wrong choice.

When you move from a adjustable rate to a fixed rate, before your maturity date, it’s called a lock in (or conversion). When you move from a fixed interest rate to a adjustable rate, before your maturity date, it is called an early renewal. The key difference between these two types of transactions is that a penalty will not be charged when you lock in, but it will be charged when you early renew. In short, yes, you can move back into a adjustable rate should you choose to later on, but you may have to pay a penalty to do so before maturity.

If, and when, you lock in your mortgage is a decision that only you can make. To determine if you should lock in, you need to determine what level of rate variation you are willing to risk. The prime rate changes in response to changes in the Bank of Canada’s key lending rate. Although you may hear speculations about upcoming rate changes, we can’t know for sure when this key lending rate will change, or by how much, until it happens. Historically, the prime rate often increases or decreases by 0.25% - 0.50%.

What’s the impact of a prime rate change?

It’s easy to lock-in to a fixed rate mortgage

How it works

Conversions/Lock Ins FAQ

We value your privacy