In 2022, a lot of people with variable-rate mortgages noticed something odd. Prime went up seven times that year, and their payment didn't change at all. For some, the first sign anything had happened was a letter from the lender mentioning a "trigger rate".
If that's you, or if you're renewing a variable mortgage soon, this explains what the trigger rate is, how it differs from the trigger point, and what tends to happen at renewal. There's a worked example using the actual prime rate since 2022, and it's less alarming than the headlines made it sound, though it's worth understanding before the renewal letter arrives.
Two kinds of variable mortgage
Not every variable mortgage behaves the same way when prime moves.
With an adjustable payment, the lender recalculates your payment each time prime changes. The mortgage stays on its original schedule, and your monthly budget absorbs the change instead. National Bank and Scotiabank's Flex Value work this way.
With a fixed payment, the amount you pay stays the same, and what changes is the split inside it. When rates rise, more of each payment goes to interest and less comes off the balance. TD, RBC, BMO and CIBC describe their standard variable mortgages this way. Scotiabank's Ultimate Variable also has a fixed payment, set using a cap rate.
Trigger rates only matter for the second kind. Your statement or your lender can confirm which one you have.
The trigger rate
On a fixed-payment variable mortgage, the trigger rate is the interest rate at which your payment only just covers the interest. Below it, part of every payment pays down the balance. Above it, none does, and on many mortgages the unpaid interest is added to what you owe. That's called negative amortization: the balance grows even though you're paying on time.
A rough way to estimate it is twelve monthly payments divided by the balance. On a $2,400 payment and a $600,000 balance, that's 28,800 ÷ 600,000, or about 4.8%. Because it depends on the balance, the trigger rate shifts a little as the balance changes.
The trigger point is different
The names are similar, which causes a lot of confusion. The trigger point is a balance, not a rate. It's the point where the amount owing reaches a set share of the original mortgage, often 105%, or of the home's value, depending on the contract. When a mortgage reaches it, lenders typically ask for a higher payment, a lump sum, or a switch to a fixed rate.
Passing the trigger rate doesn't mean you've reached the trigger point. Many mortgages spent months above their trigger rate in 2023 and 2024 without coming close to it. Your mortgage agreement states the figure that applies to you.
A 2022 variable, replayed
Here's one mortgage, replayed month by month against the Bank of Canada's published prime rate.
Aisha and Tom borrowed $600,000 on 15 February 2022, on a five-year variable at prime minus 0.90%, with a 25-year amortization and fixed payments. Prime was 2.45%, so their rate was 1.55%, and their payment was set at an estimated $2,414 a month. Their trigger rate at the start was about 4.83%.
Then prime started to climb. By autumn 2022 their rate was past 4.5%, and in December 2022 the interest for the month was larger than the payment for the first time. Their rate peaked at 6.30% in mid-2023. At that level, interest was running about $3,100 to $3,150 a month against a payment of $2,414, and the difference was added to the balance.
It stayed that way for an estimated 25 months. The balance peaked at about $605,600 in December 2024, just above what they originally borrowed, and well below a 105% trigger point of $630,000.
Then prime came down, from 7.20% to 4.45% by late 2025. Their rate today is 3.55%, comfortably below a trigger rate of about 4.86%, and each payment is paying down the balance again.
Here's where things stand, as estimates, after 55 payments:
| Estimate | |
|---|---|
| Total paid since February 2022 | $132,800 |
| Of which interest | $128,200 |
| Of which principal | $4,600 |
| Balance today | $595,400 |
| Where the original schedule expected it | $506,700 |
| Behind schedule by | $88,800 |
The rate is below the trigger rate, the balance is below the trigger point, and nothing about the mortgage is in trouble. The gap that matters is the one in the last line.
Why renewal is the moment to watch
Aisha and Tom's term ends in February 2027. At renewal, lenders usually reset the payment so the mortgage finishes on its original date, which for them means 20 years from renewal.
At today's rate, that reset payment is an estimated $3,450 a month, about $1,036 more than they pay now. That can come as a shock even though rates have fallen, because the new payment has to make up for four years in which almost nothing came off the balance. Left at $2,414, the mortgage would take about 37 years to pay off at today's rate.
Some lenders may offer a longer amortization at renewal to soften the change, which lowers the payment but adds interest over time. And prepayments before renewal narrow the gap directly. A lump sum of $60,000, 10% of the original amount and within the typical annual privilege, would bring the estimated reset payment down to about $3,095. Raising the payment by $300 a month for the five months left makes only a small dent at this stage, since there's so little time before renewal, but it helps more the earlier it starts.
The same mortgage with an adjustable payment
For comparison, the same mortgage with an adjustable payment would have seen its payment rise from $2,414 to a peak of about $3,945 in 2023, then ease to about $3,071 today. The balance would be about $534,600, much closer to the original schedule.
The adjustable version has paid about $6,100 less interest so far, because its balance came down faster, but it asked about $54,800 more of the monthly budget along the way. It took the rate rise as it happened. The fixed-payment version deferred it to renewal. That deferral is real breathing room, and for many households it was exactly what they needed in 2023. It's also why renewal is the moment to prepare for.
Seeing your own numbers
The variable rate calculator replays your own mortgage against the real prime rate since your term started. It shows where your payments went, how far the balance is from the original schedule, your trigger rate today, and an estimate of the payment at renewal. It runs in your browser, and nothing you type is sent to us.
If your renewal is close, the renewal calculator looks at the payment change and what a lump sum or a different schedule does about it. If you'd find it useful to talk it through with someone, a licensed broker can look at renewal options across lenders, and you can book a free conversation. There's no obligation either way.
Aisha and Tom are an illustrative composite. The replay uses the Bank of Canada's typical prime rate, monthly compounding, and assumes monthly payments made on time with no prepayments. All figures are estimates, the renewal payment assumes today's rate, and your lender's statement is the authoritative figure. Nothing here is a recommendation.