Trigger Rate
The interest rate at which a fixed payment on a variable-rate mortgage covers only interest, so nothing goes toward the principal.
A trigger rate applies to variable-rate mortgages with fixed payments. With this kind of mortgage, your payment stays the same when interest rates change. What changes is the split between interest and principal. When rates rise, more of each payment goes to interest and less goes to paying down what you owe.
Your trigger rate is the interest rate at which your payment covers only the interest. At that point, none of the payment reduces the principal. If rates rise further, the payment no longer covers all the interest. Unpaid interest is generally added to your balance, which is called negative amortization. You can end up owing more than you originally borrowed.
The trigger rate is different from the trigger point. The Financial Consumer Agency of Canada describes the trigger point as the moment your balance grows too large. It is measured against your home's value, using a ratio your lender sets. The trigger point is set out in your mortgage contract. Reaching it may mean you have to adjust your payments, make a prepayment or pay the balance in full.
If you reach your trigger rate, your lender may require you to increase your payments. It may instead ask for extra payments to cover the excess interest, or a switch to a fixed rate. If you are not at the maximum amortization period, the lender may offer to extend it. That eases the pressure now but means paying more interest over the life of the mortgage.
Variable-rate mortgages with adjustable payments avoid this problem, because the payment rises with the rate and a set portion still goes to principal. If you have a fixed-payment variable mortgage, ask your lender what your trigger rate and trigger point are. Contacting your lender early, before you reach either one, usually leaves you more options.
Sources
- FCAC: Managing your money when interest rates rise
- FCAC: Variable rate mortgages with fixed payments (committee briefing)
- FCAC: Interest on mortgages
Last reviewed October 16, 2026.
Go deeper
Related terms in Mortgage & Buying
- Amortization The total time it would take to pay off your mortgage at your current rate and payment, usually much longer than your rate term.
- Closing Costs The one-time fees beyond your down payment needed to complete a home purchase, often 1.5% to 4% of the price.
- CMHC Mortgage Default Insurance Insurance that protects your lender if you stop paying, and is usually required when your down payment is less than 20% of the price.
- First Home Savings Account A registered account for first-time buyers: deductible contributions of $8,000 a year up to $40,000, and tax-free withdrawals for a home.
General information only, not legal, tax, or financial advice. Rules change and vary by province; confirm the current details with the relevant authority before you rely on them.