A mortgage interest rate is a rate that is charged on the principal amount of the mortgage. The principle of the mortgage is the amount that you are borrowing. They’re quite a few factors that go into determining a mortgage rate. In general, fixed rates are affected by the bond market and variable interest rates are affected by the Bank of Canada overnight rate.

The Bank of Canada overnight rate is reviewed multiple times throughout the year and can go up or down during these reviews. Typically when this rate moves it moves by .25%. This will affect those with a variable interest rate.

A lender will add a premium to the Bank of Canada overnight rate and usually, this is about 2%. This amount can vary from lender to lender. Knowing which lenders add a larger premium to the Bank of Canada overnight rate is important. This is because if two lenders are offering you prime minus 0.5%, the lender with a larger prime rate will have a larger rate overall. Even though the discount looks the same.