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Over the past months, the Bank of Canada has made increases in its benchmark interest rate, bringing it to the highest level in years. These increases directly influence the Alterna Prime Rate, which impacts any loans with a variable rate.
As interest rates rise, you may have questions about how these rate increases will affect your mortgage(s) and your most important asset – your home.
At Alterna, we put our members first and want to provide you with straightforward, easy-to-understand information to help inform your financial decisions moving forward.
How will this increase affect existing Variable Rate mortgages?
The Alterna Prime Rate is based on the Bank of Canada's rate; consequently, our rate will continue to change as the Bank of Canada's rate moves. As a variable rate mortgage holder, the Alterna Prime Rate change will also change your mortgage interest rate.
It is important to note that while your payments remain the same, the amount of principal you pay will decrease as more of your payment will go towards the interest.
With a variable mortgage, your regularly scheduled mortgage payment amount does not change, even if interest rates move up or down. Your mortgage payment is a combination of the amount for interest and the amount for the principal to be repaid over the mortgage term. If the variable rate on the mortgage changes, the proportion of the payment amount that goes towards the interest will also change.
If you have questions, our friendly branch team members are here to help you navigate recent Alterna Prime Rate interest changes.
What is a Trigger Rate, and how does it impact a variable rate mortgage?
The trigger rate is the rate at which the regular mortgage payments no longer cover the interest, and none of the payment is allocated to the principal. As a result, any unpaid interest will be added to your mortgage balance at term renewal.
Your Alterna team is here to help you navigate what the changing interest rates mean for you and your family and to assist you in managing your mortgage payments to meet your unique needs.
How do changing interest rates affect new Variable Rate mortgages?
If you are a new homebuyer and have been pre-approved for a new variable rate mortgage, your pre-approval rate will change when the Alterna's prime interest rate changes.
If you have questions about a new mortgage, one of our Mobile Mortgage Advisors can offer you expert advice and help find a solution that will work best for you.
How do changing interest rates affect Fixed-Rate mortgages?
Current fixed-rate mortgages will not see a change in the interest rate until the mortgage term is renewed. If you have a fixed-rate mortgage that is coming up for renewal, your mortgage will be re-negotiated based on today's rates.
Will there be more changes to the prime interest rate?
There is no way to know for sure, but the financial community expects the Bank of Canada to continue to raise rates for the remainder of this year.
If you have questions, please contact your branch team, we're here to help.
Updated: February 2023