Are Interest Rates Going Up and Down at the Same Time? COVID-19

Marci • April 7, 2020

If you’re paying more attention to the Canadian economy due to COVID-19, and it seems like you’re getting mixed messages; that mortgage interest rates are going both up and down at the same time, you’re not that far off. There are a lot of moving parts, and to find clarity, we need to make sure we’re comparing apples to apples, and oranges to oranges.

Let’s begin by acknowledging that not all interest rates are the same. The term “interest rates” can mean a lot of different things in news story headlines.

The Government “overnight rate” is different from the “qualifying rate”, which is different from the banks “prime rate”, which is different from “variable rates”, which is different from the “discount on a variable rate” which is different from “fixed rates”.

Here’s a list of the different types of mortgage rates, a quick summary of what they are, the direction they’re going, and how they impact you.

Target for the Overnight Rate.

Also known as the policy rate, this is the rate that the Bank of Canada (The Government) controls. When the Bank of Canada changes the Target for the Overnight Rate, this change affects other interest rates in the economy.

Typically there are only eight days in the year for the Bank of Canada to announce if they will change the rate. However, given the recent COVID-19, the Bank of Canada has made special announcements.

The overnight rate was set with a target of 1.75% for a long time before the pandemic.

March 4th 2020, the rate was lowered to 1.25%. March 16th 2020, the rate was lowered to 0.75% in an emergency rate cut. March 27th 2020, the rate was lowered to 0.25% in a second emergency rate cut.

The overnight rate now sits at 0.25% with April 15th 2020, as the next scheduled announcement date.

By cutting interest rates, the government hopes to stimulate economic growth. Lower financing costs encourages borrowing and investing, which is what our government believes will get us through this pandemic.

Qualifying Rate

Also known as the Benchmark Qualifying Rate or the five year qualifying posted rate, this is another rate set by the government. If you’re getting an insured mortgage, the government wants to make sure you will be able to afford your mortgage at the end of your term (in case interest rates go up). So they make you qualify for your mortgage at a higher rate than you will actually be paying.

The government has recently dropped the qualifying rate from 5.19% to 5.04%. This decrease, like the drop in the overnight rate, is meant to help stimulate the economy. The average Canadian will qualify to borrow an additional $10,000 with this drop.

Banks Prime Rate

The banks prime lending rate isn’t the same as the overnight rate; however, the banks prime lending rate is impacted by the overnight rate. Each bank sets its own prime lending rate. When the Bank of Canada moves the overnight rate, typically the prime rate at each bank will follow.

Because of the emergency rate cut on March 27th, banks lowered their prime lending rate to 2.45%. Some banks moved immediately, while some made the change effective April 1st, which means the savings will be seen on May 1st, but they all did lower their prime rates.

The prime lending rate is used by banks to determine rates on floating mortgage products (like the variable rate), lines of credit, home equity lines of credit (HELOC), and some credit cards.

If you currently have a variable rate mortgage or a HELOC, a lower prime rate means that you are now paying less interest on your existing mortgage, this is a good thing.

Variable Rate Mortgage

A variable rate mortgage is a mortgage that fluctuates with the prime lending rate. Typically, the mortgage rate will change with the prime lending rate and includes a “component” or “discount” to the prime rate +/- a specified amount, such as Prime – 0.45%. The lender sets this component to prime.

So, if you have a variable rate mortgage at Prime -0.45%, the rate you’d be paying today (with a prime rate of 2.45%) is 2%.

This is where it gets a little confusing because while the government is trying to stimulate the economy by lowering the overnight rate, banks have followed by lowering their prime rate, but at the same time have increased the component to prime – by the same amount 0.5%.

Although there are immediate savings for existing variable rate mortgage holders, anyone looking to get a new variable rate mortgage will do so at a higher rate than a few weeks ago.

Fixed Rate Mortgage

As its name suggests, a fixed rate mortgage is where your mortgage rate stays the same throughout your term. Your rate isn’t tied to the prime lending rate but rather is unmoved by outside factors. With all the uncertainty in the Canadian economy, lenders have actually been increasing rates for new fixed rate mortgages.

So while the government is doing all they can to keep rates low, why are banks increasing fixed rate mortgages?

Well, banks are in the business of making money, and given that over 2 million Canadians have applied for some kind of assistance to get through COVID-19, the fear is that mortgage delinquency will go up considerably as the coronavirus financially impacts people.

Banks are increasing fixed rates to protect themselves against economic uncertainty.

So what does this mean for you? Well, as everyone’s financial situation is different, it’s impossible to give blanket advice that applies to everyone. But here is some general advice.

Existing Variable Rate Holders

You’re doing well. The recent drop in the banks prime rate to 2.45% has lowered the amount of interest you are paying on your mortgage. You have a discount to prime for the remainder of your term that isn’t currently available in the market. Your mortgage rate is one of the lowest in Canadian history.

As the next announcement by the government will be April 15th 2020, there is a chance your rate could go even lower.

If at this time, you’re considering locking your variable rate into a fixed rate, that would significantly increase the amount of interest you are paying. As fixed rates have increased over the last weeks, this isn’t a good option right now.

The reason you went variable in the first place is the reason you should stay variable at this point. With all the economic uncertainty, the prime rate won’t be going up anytime soon.

Existing Fixed Rate Mortgage Holders

Your fixed rate is set lower than the fixed rates currently being offered. If you break your term now, you will incur a higher penalty. So unless you must make a move, it would probably be best just to stay the course.

Hopefully, fixed rates will go down when the economic uncertainty winds down, and rates will be in a good spot when your term comes up for renewal.

Are you looking for a new mortgage?

The most important thing for you going forward is flexibility. Variable rates are still historically low, and although fixed rate mortgages have gone up over the last weeks, there are many great options, maybe a shorter term is a better fit for you?

The best place to start is to contact me directly so we can go over your financial situation and discuss the best plan for you to move ahead in these uncertain times.

So although it may appear that mortgage interest rates are going both up and down at the same time, understanding what is meant by “interest rates” is crucial. The government is lowering rates to stimulate the economy, while banks are trying to protect themselves against future losses by increasing rates while they can.

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Is Refinancing Your Mortgage a Good Way to Consolidate Debt?

By Marci Deane • December 3, 2025
If you're a homeowner juggling multiple debts, you're not alone. Credit cards, car loans, lines of credit—it can feel like you’re paying out in every direction with no end in sight. But what if there was a smarter way to handle it? Good news: there is. And it starts with your home. Use the Equity You’ve Built to Lighten the Load Every mortgage payment you make, every bit your home appreciates—you're building equity. And that equity can be a powerful financial tool. Instead of letting high-interest debts drain your income, you can leverage your home’s equity to combine and simplify what you owe into one manageable, lower-interest payment. What Does That Look Like? This strategy is called debt consolidation , and there are a few ways to do it: Refinance your existing mortgage Access a Home Equity Line of Credit (HELOC) Take out a second mortgage Each option has its own pros and cons, and the right one depends on your situation. That’s where I come in—we’ll look at the numbers together and choose the best path forward. What Can You Consolidate? You can roll most types of consumer debt into your mortgage, including: Credit cards Personal loans Payday loans Car loans Unsecured lines of credit Student loans These types of debts often come with sky-high interest rates. When you consolidate them into a mortgage—secured by your home—you can typically access much lower rates, freeing up cash flow and reducing financial stress. Why This Works Debt consolidation through your mortgage offers: Lower interest rates (often significantly lower than credit cards or payday loans) One simple monthly payment Potential for faster repayment Improved cash flow And if your mortgage allows prepayment privileges—like lump-sum payments or increased monthly payments—those features can help you pay everything off even faster. Smart Strategy, Not Just a Quick Fix This isn’t just about lowering your monthly bills (although that’s a major perk). It’s about restructuring your finances in a way that’s sustainable, efficient, and empowering. Instead of feeling like you're constantly catching up, you can create a plan to move forward with confidence—and even start saving again. Here’s What the Process Looks Like: Review your current debts and cash flow Assess how much equity you’ve built in your home Explore consolidation options that fit your goals Create a personalized plan to streamline your payments and reduce overall costs Ready to Regain Control? If your debts are holding you back and you're ready to use the equity you've worked hard to build, let's talk. There’s no pressure—just a practical conversation about your options and how to move toward a more flexible, debt-free future. Reach out today. I’m here to help you make the most of what you already have.

Breaking Down the Real Costs of Homeownership

By Marci Deane • November 26, 2025
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By Marci Deane • November 19, 2025
Why a Mortgage Pre-Approval Protects Both Your Head and Your Heart There’s no denying it—buying a home is an emotional journey. In a competitive market, it can feel like you need to stretch beyond your comfort zone or bid above asking just to have a chance. That pressure can make it hard to separate what you want from what you can realistically afford. One of the biggest pitfalls buyers face is falling in love with a home that’s outside their price range. Once that happens, every other property seems like a compromise—even the ones that might have been a perfect fit otherwise. The best way to avoid this heartache? Get pre-approved before you start shopping. What a Pre-Approval Does for You A mortgage pre-approval gives you more than just a number—it provides clarity, confidence, and protection: Know your buying power : Shop within your true price range and avoid disappointment. Spot potential roadblocks : Uncover issues like credit bureau errors before you make an offer. Get organized : Learn exactly what documentation you’ll need so there are no surprises. Lock in a rate : Many lenders hold your rate for 30–120 days, giving you peace of mind if rates rise. Save yourself heartache : Protect yourself from falling for a home you can’t afford. Head vs. Heart Buying a home is about balance. Your head tells you what’s financially sound, your heart tells you what feels right—and both matter. A pre-approval helps bring those two sides together, so you can make confident choices without emotional stress clouding your judgment. The Bottom Line Looking at properties for fun is one thing—but if you’re serious about buying, a pre-approval is the smartest first step you can take. It sets realistic expectations, saves time, and protects your emotions along the way. If you’d like to explore your options and get pre-approved, I’d be happy to walk through the process with you. Let’s make sure you’re ready to shop with confidence.