News & Resources

The Refinance Clock Is Ticking Down

June 8, 2021
5 mins
An older couple speak with a broker

Bond market forecasts now suggest interest rates could climb up to 200 basis points before they level off, potentially over the next five years or so.

For its part, the Bank of Canada has put Canadians on notice to expect a rising prime rate starting in the second half of next year.

Given the potential for higher rates ahead, the next few months could be the last great opportunity to consolidate higher-cost debt at still-low mortgage rates.

A Look at the Numbers

A simple example makes the case.

Assume for a moment that you’re carrying the following debt at the interest rates below, and that your mortgage matures in two years.

Refinance calculations3.png

* Based on bond market forecasts as of June 8, 2021.

** Assumes sufficient equity to refinance, no new borrowing, a 20-year remaining amortization, a 3-months' interest penalty to refinance early, and interest-only payments on the HELOC and credit card debt at prime + 0.50% and prime + 18% respectively.

Today's Featured RatesUpdated 09:27 ET on Sep 27, 2023

Rates are based on a $300,000 mortgage.

card image
3.60%
Term
3 Yr Variable
Loan to value
80.01% to 95%
Insurance
Insured
Rate held until
Jan 01
card image
1.99%
Term
5 Yr Variable
Loan to value
80.01% to 95%
Insurance
Insured
Rate held until
Jan 31
card image
1.67%
Term
5 Yr Fixed
Loan to value
80.01% to 95%
Insurance
Insured
Rate held until
Nov 17

A borrower in this boat could face dramatically higher interest costs (roughly $25,550 over 60 months) if they chose not to refinance.

This example assumes a 3-months' interest penalty to refinance early. In practice, the prepayment charge could be higher depending on your lender and mortgage type. That penalty would reduce the advantage of refinancing, but nowhere near enough to negate the overall benefit.

Refinancing now would also lock in a fixed rate ahead of Bank of Canada hikes that could see rates jump far more than the modest 0.75 percentage points assumed above.

There’s no one-size solution for all, however, so speak with a mortgage professional to evaluate your interest savings opportunity. But if you have sufficient home equity, adequate qualifications for a mortgage and a meaningful amount of lingering debt at a 3%+ rate, don’t put off that conversation too long.

RATESDOTCA Team


The RATESDOTCA editorial team are experienced writers focused on sharing stories and bringing you the latest news in insurance and personal finance. Our goal is to provide Canadians with the information and resources they need to make better insurance and financial decisions.

Latest mortgage articles

$23,579: This is how much more a variable-rate could have cost homeowners over fixed-rate
RATESDOTCA looked at fixed- vs. variable-rate to see how much more in interest someone with a variable-rate would've paid over the course of a mortgage.
Learn More
7 mins read
Looking for a new home? Why you need to pre-qualify first
Mortgage pre-approvals save time, angst, and give you leverage to make serious offers before someone else beats you to it!
Learn More
3 mins read
After two rate hikes, Bank of Canada pauses policy rates – for now.
After two successive hikes over the summer, the Bank of Canada has announced that it will be pausing the overnight policy rate at 5.00%
Learn More
5 mins read

Subscribe to our newsletter

Stay on top of our latest offers, relevant news and tips!

Thanks for joining!

You'll be hearing from us shortly - stay tuned.