Rates and interest
Posted rate
A lender's advertised list rate, well above what borrowers pay, and the rate some penalties are calculated from.
Posted rates are list prices, and very few borrowers pay one. They matter most when you break your mortgage, because some lenders use them to calculate the penalty.
When a lender calculates a fixed-rate interest-rate differential from its posted rate, the method is: take the current posted rate for the remaining term, subtract the discount you got off posted when you signed, and compare the result to your contract rate. Posted rates sit far above the rates people pay, so the comparison rate comes out low and the differential comes out wide.
So if you negotiated a large discount at signing, you'll face a larger penalty when you break, because that same discount is subtracted again.
Posted rates also used to set the stress test. They don't anymore. The minimum qualifying rate is now the greater of your contract rate plus 2 percentage points or 5.25%.
Related terms
Discounted rate
The rate you pay after the lender's discount off its posted rate, and the rate a fair penalty calculation should use.
Interest-rate differential (IRD)
A prepayment penalty calculated from the gap between your rate and a comparison rate, applied over the months left in your term.
Qualifying rate
The rate lenders test you at: the greater of your contract rate plus 2 percentage points, or 5.25%.
This definition describes how the term is used in Canadian residential mortgage lending. It’s general information, not advice on your file. Rules, thresholds and rates change. Where a figure is quoted, it’s current as of the date shown on the related guide.
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