Quote Originally Posted by Polish_Silver View Post
You mean all the rates are adjustable? I'd be really scared to get one of those!

How are the rates determined? And is there a limit?
The mortgage market varies from "variable rate" mortgages, which adjust each month based on Canadian bank prime rate, to fixed interest for anywhere from 6 months to 5 years. There are some exceptions, but this is the core of the market. If rates are high and declining then shorter terms and variable rate are more popular, if rates might be headed higher then more people prefer to lock in for 5 year terms. At the end of the term the entire mortgage comes due and a new mortgage has to be taken out. If one stays with the same bank its usually just a paperwork formality. If you change lenders then a new appraisal and so forth has to be done on the property and it gets more expensive.

In really severe property price collapses, such as the one that Alberta experienced in the early 1980s, lenders can simply stop writing mortgages and they won't renew your expiring mortgage. That just added to the collapse of the housing market back then, with houses selling well below lot service and construction costs at the bottom...much like Phoenix and parts of inland California and Florida not that long ago.

Mortgage rates tend to track the Canadian bank prime rate, government bond rates and GIC deposit rates for the applicable term, with the usual healthy mark-up for the banks to make their executive and Board bonus money.