How Mortgage Rates are Determined

When the mortgage rate shifts even the slightest, the shockwave can reverberate throughout the housing market. There is also a potential ripple effect that can impact the job market and the provincial and national economy. Don’t treat mortgage rates as some boogeyman lurking in the closet waiting to scare you. The best advice is to understand what determines mortgage rates so you can forecast, predict and plan with greater ease and assurance.

Let’s review the factors that determine the mortgage rate to make sure you are prepared for whatever is going to happen next.


A common misconception is that The Bank of Canada sets the mortgage rates. As one of the nation’s most influential institutions, The Bank of Canada determines the overnight rate. Banks use the overnight rate to set their prime lending rate. The Bank of Canada helps stimulate the economy or deal with inflation, both of which could determine mortgage rates.

Since the Bank of Canada is tasked with safeguarding the Canadian economy and providing the overnight rate, the economy plays a distinct role in determining mortgage rates even if it’s at a very high-level.

Purchase Details

The down payment, the location of the property, the price of the property and the loan amount will all factor into determining your mortgage rate. A lender must review the details of the purchase to calculate which rate would apply to your loan. One example of this is that a higher down payment could result in a lower interest rate because a lender sees the loan as less risky.

Credit Score 

Certain factors that determine your personal mortgage rate are out of your hands. Your credit score, though, is a way for borrowers to exercise some control over how much interest they pay on their mortgage. This is based on your history of accruing and repaying debt and tells lenders how much risk is involved with a mortgage application.

A positive credit score means you could possibly receive a lower mortgage rate. A poor credit score means you might have to pay a higher rate to offset the risk.

Contact us to learn more about mortgage rates or to start your pre-approval process.





Bob Aggarwal

Mr. Aggarwal was one of the original founders of, one of the largest volume Mortgage Brokerage houses in Canada. Mr. Aggarwal has over 12 years of experience in Brokerage and Lending in the small and medium business sector, as well as experience and expertise in the residential housing market. Since the inception of, Mr. Aggarwal has been instrumental in developing the operating platforms, and policies and procedures which have guided the organization to date.


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