But if interest rates continue to rise, interest payments could increase when the trigger rate is surpassed.The “trigger rate” is the interest rate level that, when surpassed, causes a mortgage holder’s monthly payments to change. The trigger rate has been largely ignored for decades, because the last time Canadians had to deal with fast-rising rates was the late 1970s.
The exact triggering rate is different for every mortgage holder and depends on the size of their loan, the amount of their monthly payment, the interest rate of the mortgage and length of the amortization period.It is not possible to switch from a fixed to variable rate without breaking the mortgage contract .
Switching from a variable to a fixed-rate mortgage typically requires you to pay a penalty equal to three months’ worth of interest, depending on the lender. However, you may not be able to lock in at the most competitive fixed rate available, and the terms of your mortgage may stay the same. That means whatever fixed rate you are converting to might only be valid for the remainder of time on your current term, and you will be forced to renegotiate that rate once your mortgage is up for renewal.