Your Trigger Rate Is 6.25%: What a Rate Hike Actually Does to a Fixed-Payment Variable Mortgage

October 13, 2026 — The bond market reopened today pricing roughly a 41% chance of a Bank of Canada hike on October 28 and about 49% by December 9, with the policy rate sitting at 2.25% and prime unchanged at 4.45% since October 29, 2025. If you hold a variable mortgage with a fixed payment, the number you are probably searching for is your trigger rate — the rate at which your payment stops touching principal. Here is the honest answer: on a $500,000 variable taken a year ago at prime minus 0.90%, your trigger rate is 6.25%, which needs prime at 7.15% — about 2.70 points, or eleven quarter-point hikes, above where prime sits today. The trigger rate is not your problem. Amortization drift is, and one hike starts it.

What a trigger rate actually is

Canadian variable mortgages come in two shapes. An adjustable-rate mortgage moves your payment every time prime moves. A fixed-payment variable keeps the payment identical and silently changes the split between interest and principal.

Your trigger rate only exists in the second kind. It is the rate at which your fixed payment covers accruing interest and nothing else — principal repayment hits zero. Above it, the shortfall is added to your balance (negative amortization) and your lender will contact you to raise the payment or make a lump sum.

The arithmetic is simple. Your payment was set when your mortgage funded, based on the rate that day. Your balance has fallen since, and a smaller balance needs a higher rate to generate the same interest charge — so every payment you make pushes the threshold further away. It is a moving target, which is why a number quoted to you at closing is already stale.

Your trigger rate today: run the number

Take an illustrative case: $500,000 over 25 years, funded last November at prime minus 0.90% — 3.55%, with prime at 4.45%. The fixed payment is $2,509.57. Eleven payments later the balance is $488,377. All figures use Canadian semi-annual compounding.

At that balance and payment, the trigger rate is 6.25%. Because the discount is 0.90% off prime, prime itself would have to reach 7.15%. The discount matters more than the size of the mortgage — the table below holds the balance at $500,000 and varies only the discount.

Rate at funding	Start rate	Fixed payment	Trigger rate	Prime needed	Headroom
Prime − 1.05%	3.40%	$2,470	6.15%	7.20%	2.75 pts (11 hikes)
Prime − 0.90%	3.55%	$2,510	6.25%	7.15%	2.70 pts (11 hikes)
Prime − 0.50%	3.95%	$2,617	6.51%	7.01%	2.56 pts (10 hikes)
Prime flat	4.45%	$2,753	6.84%	6.84%	2.39 pts (10 hikes)
Prime + 0.50%	4.95%	$2,894	7.19%	6.69%	2.24 pts (9 hikes)

A deeper discount gives you a lower trigger rate but more headroom. That looks backwards until you see why: the deeper discount also gave you a smaller payment, which lowers the threshold, but it starts you further below prime, so prime has further to travel. The headroom column is the one that matters.

The dollar balance barely moves the answer. Run the same 3.55% case at $400,000 or $600,000 and the figure is still 6.25%: payment and balance scale together, so they cancel. Your trigger rate depends on your rate at funding and how long you have been paying — not how big your mortgage is.

Why the 2022 panic does not repeat in 2026

The trigger rate became a household term in 2022 for a reason. Borrowers who funded a variable in 2021 at prime minus 1.00%, when prime was 2.45%, paid 1.45%. On $500,000 that is a $1,986.94 payment and a trigger rate at funding of just 4.82% — prime at 5.82%. Prime went to 7.20%. Hundreds of thousands blew straight through it.

The cohort funding variables in 2025 and 2026 is structurally different. They qualified under the stress test at rates well above contract and funded at 3.40% to 3.95% rather than 1.45%, so their payments were set accordingly. A payment built on 3.55% carries far more interest headroom than one built on 1.45%.

For this cohort to be threatened, prime would need to rise roughly 2.4 to 2.8 points. Markets are currently pricing less than one hike by December. No one can tell you what prime does over five years, and these probabilities are market expectations that move daily — but the gap between one priced hike and the ten or eleven required is wide enough that this is the wrong thing to lose sleep over.

What a hike really costs: amortization drift

Here is what does bite. Your payment never changes, so the damage is invisible on your bank statement. It shows up in how long you pay.

Same case, balance $488,377, payment frozen at $2,509.57. At 3.55%, $1,434.21 of that is interest and $1,075.35 reaches principal, leaving about 24.1 years. Then prime moves.

Prime	Your rate	Interest portion	Principal portion	Remaining amortization
4.45% (today)	3.55%	$1,434.21	$1,075.35	24.1 years
4.70% (+1 hike)	3.80%	$1,534.42	$975.14	25.1 years
4.95% (+2)	4.05%	$1,634.53	$875.03	26.3 years
5.20% (+3)	4.30%	$1,734.54	$775.02	27.6 years
5.45% (+4)	4.55%	$1,834.45	$675.12	29.2 years
5.70% (+5)	4.80%	$1,934.25	$575.31	31.1 years

One quarter-point hike moves $100.21 a month from principal to interest and adds roughly a year to your amortization. Three hikes add three and a half years. Five add seven. You never miss a payment, nothing arrives in the mail, and you owe an extra seven years.

This is where it connects to the renewal math: lenders do not let amortization drift forever. At renewal, most re-amortize you back to the original schedule, forcing the payment increase you avoided all term, all at once. The drift is a deferral, not a discount. We covered the scale of that reset in mortgage renewal shock in 2026.

If your payment does move instead

If you hold an adjustable-rate mortgage, you have no trigger rate at all — your payment absorbs the hike immediately and your amortization stays put. On the same balance, re-amortized over the remaining 24 years and one month:

• One hike: payment rises $64.55 to $2,574.12 — about $775 a year.
• Two hikes: $129.94 to $2,639.51 — about $1,559 a year.
• Three hikes: $196.16 to $2,705.73 — about $2,354 a year.
• Four hikes: $263.20 to $2,772.77 — about $3,158 a year.

Neither structure is free. The fixed-payment version charges you in time, the adjustable version in cash flow — but the adjustable borrower at least sees the bill. For how prime feeds your payment, see prime rate explained.

What to do before October 28

The Bank of Canada announces at 09:45 ET on October 28 alongside a Monetary Policy Report, with the final 2026 decision on December 9. Concrete steps, in order:

1. Find out which mortgage you actually have. Many borrowers who say "variable" hold an adjustable. Your statement or lender portal will say whether the payment is fixed. If it is fixed, you have a trigger rate; if not, you do not.
2. Ask your lender for your trigger rate and trigger point in writing. The first is a rate; the second is the balance at which your lender intervenes, often the original principal or 80% of value. They are different numbers and both sit in your commitment.
3. Check your current principal portion. If less than $700 of a $2,500 payment is reaching principal, your amortization has already drifted materially and the renewal reset is building.
4. Raise the payment voluntarily now. Most lenders allow a 10% to 20% annual payment increase without penalty. Adding $100 a month on this balance holds your amortization flat through roughly one hike, and costs far less than a re-amortization at renewal.
5. Price the switch, do not assume it. Best 5-year fixed was 4.34% and best 5-year variable 3.40% as of October 12, 2026 — a $253.03 monthly gap on $500,000, or $3,036 a year. The variable only loses that race after about four hikes, and nobody can promise which way it goes.
6. If you are within 120 days of renewal, hold a rate. A hold is free optionality against the October 28 and December 9 decisions.

The data behind the October 28 decision

The case for a hike rests on inflation: headline CPI ran 3.0% year over year in August 2026, unchanged from July, at the top of the Bank's 1% to 3% control range. The next CPI release lands October 19, before the decision.

The case against rests on the labour market. September's Labour Force Survey, released October 9, showed employment down 68,000 — a second consecutive decline — unemployment up to 6.5%, and average hourly wages growing just 2.3% year over year. Public sector employment fell 70,000, its fourth straight monthly drop. That report pushed the market's hike pricing from October toward December, as we covered in the jobs report and the December hike.

The 5-year Government of Canada bond yield was 3.60% as of October 8, 2026, and it anchors fixed pricing, not the policy rate. A hike already priced into bonds does not move fixed rates much on the day. If you are weighing the two, variable or fixed in late 2026 works through it.

Common questions

Does hitting my trigger rate mean my lender can demand payment?

Not immediately. Crossing it means your payment covers only interest. Your lender typically contacts you when you reach the trigger point — the balance threshold in your commitment, often your original principal — and will ask you to increase the payment, make a lump sum, or convert to a fixed rate. It is a contractual conversation, not a default, provided you respond.

Can I find my trigger rate myself?

Yes. Divide your monthly payment by your current balance — that gives you the effective monthly interest rate. Then convert it to the Canadian annual nominal rate your lender quotes, which uses semi-annual compounding: 2 × ((1 + payment ÷ balance)^6 − 1). On a $2,509.57 payment and a $488,377 balance that works out to 6.25%. Confirm it with your lender, since some run the calculation against a different balance than the one on your statement.

Should I switch to a fixed rate to eliminate the trigger rate risk?

It depends what you are buying. Moving from 3.55% to a 4.34% fixed costs you money immediately and for the whole term, in exchange for certainty. With roughly 2.70 points of headroom, you are paying a known premium to insure against a scenario markets are not currently pricing. The stronger reason to consider fixed is that you cannot absorb a renewal re-amortization — not the trigger rate itself. That is a cash-flow question about your household, and RateShop can price both sides so you compare real numbers rather than adjectives.