HOW MORTGAGE RATES WORK

Many homeowners wonder why mortgage rates rise and fall — and what lenders look at when determining your final rate. Mortgage pricing is influenced by multiple risk factors, market conditions, and lender policies, not just the advertised rate.

Here are the 10 major factors that affect your mortgage rate 👇

1️⃣ Location

Your province can influence your interest rate.

✔️ competitive markets often see lower rates

✔️ lender risk varies by region

✔️ property demand affects pricing

Lenders adjust rates based on regional stability and market strength.

2️⃣ Rate holds and timing

A rate hold protects your rate for 90–120 days.

✔️ if closing falls outside the hold, rates are reassessed

✔️ rising rates can increase your final pricing

✔️ early planning prevents surprises

Monitoring timelines ensures your hold remains valid.

3️⃣ Refinancing vs. purchasing

Your purpose affects your rate.

✔️ purchases often get the best rates

✔️ refinances are priced slightly higher

✔️ transfers may carry additional premiums

Brokers compare multiple lenders to reduce this cost difference.

4️⃣ Property type and risk level

Some homes are considered higher risk.

✔️ condos vs. detached

✔️ rural vs. urban

✔️ unique or non-standard properties

Higher risk to the lender may mean a higher rate.

5️⃣ Income or secondary properties

Investment or vacation homes are priced differently.

✔️ rental properties carry higher risk

✔️ second homes may have rate premiums

✔️ lenders assess occupancy risk

Brokers match property types with lenders that offer the best terms.

6️⃣ Your credit score

Your credit health directly impacts rate eligibility.

✔️ strong payment history = better rates

✔️ high utilization increases pricing

✔️ lenders rely heavily on credit data

A higher score reduces borrowing costs significantly.

7️⃣ Insured vs. uninsured mortgages

Federal rules impact how rates are set.

✔️ insured mortgages (under 20% down) often get lower rates

✔️ uninsured mortgages carry higher premiums

✔️ risk category affects lender pricing

Insurance rules influence how lenders structure their rates.

8️⃣ Fixed vs. variable rates

The mortgage type impacts the pricing model.

✔️ fixed rates follow the bond market

✔️ variable rates move with Bank of Canada policy

✔️ lender discounts vary by product

Economic trends strongly influence this choice.

9️⃣ Loan-to-value (LTV) ratio

The size of your down payment affects risk.

✔️ higher LTV = higher risk

✔️ lower equity can raise your rate

✔️ insured high-LTV mortgages sometimes get better pricing

Risk assessment drives lender decisions here.

🔟 Income level and purchasing power

Income doesn’t directly change the rate — but it affects qualification.

✔️ stronger income improves approval strength

✔️ impacts down payment capacity

✔️ influences product and lender choice

Better qualification often leads to better rate options.

💬 Final Thought

Mortgage rates are shaped by multiple risk factors, lender policies, and market conditions — not just one variable. Understanding how each element affects pricing helps you plan strategically and secure the most competitive rate available.

If you’d like a customized rate assessment based on your income, credit, and property goals, send The Frontline Mortgage Group a message anytime.