What is a trigger rate on a mortgage in Canada?

Your trigger rate is the interest rate at which your entire mortgage payment goes to interest and nothing goes to principal. At your trigger rate, you are no longer paying down your mortgage — you are treading water. If rates rise above your trigger rate, you enter negative amortization, where your mortgage balance actually grows with each payment because the payment cannot cover the full interest charge.

How do I calculate my trigger rate?

The approximate formula is: Trigger Rate = (Payment Amount × Number of Payments Per Year) ÷ Outstanding Balance. For example, if your monthly payment is $2,100 and your balance is $450,000: ($2,100 × 12) ÷ $450,000 = 5.60%. If your variable rate hits 5.60%, your entire payment goes to interest.

What happens when you hit your trigger rate?

When you hit your trigger rate, your payment covers only the interest — zero goes toward principal. Your amortization effectively becomes infinite because you are not paying down the balance. If rates rise even slightly above your trigger rate, you enter negative amortization and your balance starts growing. Most lenders will notify you (some are better than others) and suggest options like increasing your payment.

Is trigger rate the same as trigger point?

No. Trigger rate is the interest rate at which your payment only covers interest (nothing to principal). Trigger point is when your outstanding balance grows to exceed a set percentage of your original home value — typically 65%–80% depending on the lender. The trigger point is a lender-imposed threshold that forces action. You can hit your trigger rate without hitting your trigger point, and vice versa.

Can my lender increase my payment without my consent at the trigger rate?

It depends on the lender and your mortgage contract. Some lenders (like TD) have contractual provisions to automatically adjust payments at the trigger point. Others (like CIBC) notify you and give you options but cannot force a payment change without your agreement at the trigger rate. However, at the trigger point (when balance exceeds the threshold), most lenders have the contractual right to require action. Always check your specific mortgage agreement.

Mortgage Trigger Rate Explained: What It Means for Your Variable Mortgage (2026)

The trigger rate became the most Googled mortgage term in Canada during 2022 when the Bank of Canada launched its aggressive rate hiking cycle. Hundreds of thousands of variable-rate mortgage holders discovered that there was a hidden threshold in their mortgage — a rate at which their payment would stop reducing their balance entirely. Understanding your trigger rate, how to calculate it, and what to do when you hit it is essential for any Canadian with a fixed-payment variable-rate mortgage.

What Is the Trigger Rate?

The Definition

Your trigger rate is the interest rate at which 100% of your mortgage payment goes to interest and 0% goes to principal.

Payment Allocation	Below Trigger Rate	At Trigger Rate	Above Trigger Rate
Interest portion	Partial	100%	100% + shortfall
Principal portion	Some	0%	Negative (balance grows)
Balance direction	Decreasing	Flat	Increasing

Visual Example

On a $450,000 mortgage with a $2,100 fixed monthly payment:

Variable Rate	Monthly Interest	To Principal	Balance Direction
3.50%	$1,313	$787	↓ Decreasing
4.50%	$1,688	$412	↓ Decreasing (slower)
5.00%	$1,875	$225	↓ Decreasing (slow)
5.60% (Trigger Rate)	$2,100	$0	→ Flat
6.00%	$2,250	−$150	↑ Increasing
6.50%	$2,438	−$338	↑ Increasing (faster)

How to Calculate Your Trigger Rate

The Formula

Trigger Rate = (Payment × Payments Per Year) ÷ Outstanding Balance

Calculation Examples

Scenario	Monthly Payment	Balance	Trigger Rate
A	$1,800	$350,000	($1,800 × 12) ÷ $350,000 = 6.17%
B	$2,100	$450,000	($2,100 × 12) ÷ $450,000 = 5.60%
C	$2,500	$550,000	($2,500 × 12) ÷ $550,000 = 5.45%
D	$3,200	$750,000	($3,200 × 12) ÷ $750,000 = 5.12%
E	$1,500	$250,000	($1,500 × 12) ÷ $250,000 = 7.20%

Key insight: Larger mortgages relative to payments have lower trigger rates — meaning they hit the threshold sooner when rates rise. Borrowers who stretched to the maximum they could afford at rock-bottom rates in 2020–2021 had the lowest trigger rates and were hit first.

For Bi-Weekly Payments

If you pay bi-weekly:

Trigger Rate = (Bi-Weekly Payment × 26) ÷ Outstanding Balance

Bi-Weekly Payment	Balance	Trigger Rate
$970	$450,000	($970 × 26) ÷ $450,000 = 5.60%

Note on Compounding

The formula above gives an approximation. Canadian mortgages compound semi-annually (not monthly), so the exact trigger rate may be slightly different. For most borrowers, the approximation is within 0.05–0.10% of the actual number.

Trigger Rate vs Trigger Point

These terms are related but distinct. Both became relevant during the 2022–2023 rate cycle.

Concept	Trigger Rate	Trigger Point
What it is	The rate where payment = interest only	The point where balance exceeds a % of original property value
What it means	No principal is being paid down	Lender’s risk threshold has been breached
Who defines it	Mathematical — based on your payment and balance	Contractual — defined in your mortgage agreement
What happens	Negative amortization begins	Lender requires action (payment increase or lump sum)
Typical threshold	Varies by borrower	65%–80% LTV or balance exceeding original balance
Lender notification	Not always guaranteed	Usually required by contract
Action required	Optional (but recommended)	Mandatory (lender enforces)

Example: Hitting Trigger Rate BEFORE Trigger Point

Metric	Value
Original balance	$450,000
Current balance	$455,000 (after 6 months of negative amortization)
Home value at purchase	$562,500
LTV at purchase	80%
Current LTV	80.9% ($455,000 ÷ $562,500)
Trigger point (lender-defined)	105% of original balance = $472,500
Status	Past trigger rate but NOT at trigger point yet

In this case, you are in negative amortization but the lender has not taken action because the balance has not yet exceeded the trigger point threshold. You should act on your own before it gets there.

What Happens When You Hit the Trigger Rate

Immediate Effects

Effect	Details
Principal repayment stops	100% of payment goes to interest
Amortization becomes infinite	You will never pay off the mortgage at this payment level
Balance may begin growing	If rates go even slightly higher
Lender may notify you	Some do, some don’t (it’s not always consistent)

If Rates Continue Rising Past the Trigger Rate

Additional Rate Above Trigger	Monthly Balance Increase	Annual Balance Increase
+0.25%	$94	$1,125
+0.50%	$188	$2,250
+1.00%	$375	$4,500
+1.50%	$563	$6,750
+2.00%	$750	$9,000

Based on $450,000 balance.

Lender Policies When You Hit the Trigger Rate

Big 5 Bank Approaches

Lender	Payment Type	At Trigger Rate	At Trigger Point
TD	Fixed payment	Sends notification; offers increase	May force payment adjustment
CIBC	Fixed payment	Notifies borrower; suggests options	Requires borrower action
BMO	Adjustable	Payment auto-adjusts (no trigger rate issue)	N/A
RBC	Adjustable	Payment auto-adjusts (no trigger rate issue)	N/A
Scotiabank	Adjustable	Payment auto-adjusts (no trigger rate issue)	N/A
National Bank	Fixed payment	Notifies borrower	May require action

If your mortgage is with BMO, RBC, or Scotiabank, your payment adjusts automatically when rates change, so you never hit a trigger rate. The trigger rate issue is specific to fixed-payment variable mortgages (TD, CIBC, National Bank, and some credit unions).

What to Do If You Have Hit Your Trigger Rate

Option 1: Increase Your Payment (Best Option for Most)

Action	Details
Use prepayment privilege	Increase payment by 10–25%
Target payment	At least enough to cover interest + some principal
Cost	None — no fees or penalties
Timeline	Immediate effect

Option 2: Make a Lump Sum Payment

Action	Details
Use annual lump sum privilege	10–20% of original principal
Effect	Reduces balance, which reduces monthly interest, which may bring payment back above interest level
Cost	Uses your savings/investments
Timeline	Immediate effect

Option 3: Convert to Fixed Rate

Action	Details
Request conversion	Call lender and ask for variable-to-fixed switch
New rate	Lender’s current fixed rate (may not be the best available)
Penalty	Some lenders charge; others convert at no cost
Risk	If rates are about to fall, you lock in a high fixed rate

Option 4: Refinance

Action	Details
Break the variable mortgage	Penalty = 3 months’ interest
Get new mortgage	At a new rate (fixed or variable) with a new lender
Benefit	Fresh start; competitive rate shopping
Cost	3 months’ interest + legal fees ($1,500–3,000)

Option 5: Do Nothing and Wait for Rate Cuts

Action	Details
Keep making the same payment	Balance grows slowly
Wait for Bank of Canada rate cuts	Variable rate drops, trigger rate issue resolves
Risk	Balance grows until rates fall; if rates stay high, the damage compounds
When appropriate	Only if rate cuts are imminent and the negative amortization amount is small

Prevention: Avoiding Trigger Rate Issues in the Future

Strategy	How It Helps
Choose adjustable-payment variable	Payment moves with rate — no trigger rate
Set payment higher than minimum	Build a buffer so trigger rate is far away
Use accelerated bi-weekly	Higher effective annual payment
Monitor Bank of Canada announcements	Stay aware of rate direction
Know your trigger rate	Calculate it the day you sign the mortgage

How the Bank of Canada Rate Cycle Affected Trigger Rates

Bank of Canada Rate	Typical Variable Rate	Typical Trigger Rate	Status for Most Borrowers
0.25% (Jan 2022)	1.45%	5.50–6.00%	Well below trigger
1.00% (Apr 2022)	2.20%	5.50–6.00%	Below trigger
2.50% (Jul 2022)	3.70%	5.50–6.00%	Approaching trigger
3.75% (Oct 2022)	4.95%	5.50–6.00%	Hit trigger
4.50% (Jan 2023)	5.70%	5.50–6.00%	Past trigger — negative amortization
5.00% (Jul 2023)	6.20%	5.50–6.00%	Deep negative amortization
4.25% (Jan 2025)	5.45%	5.50–6.00%	Recovering — closer to trigger
2.25% (Aug 2026 actual)	~3.45%	5.50–6.00%	Below trigger again — most fixed-payment variable borrowers have payment room again