Two prices for the same mortgage
A posted rate is a lender's advertised price for a given term: one-year fixed, three-year fixed, five-year fixed and so on. The Bank of Canada collects the major chartered banks' posted rates and publishes them weekly, including the conventional five-year rate that often turns up in news stories. Those figures are real, but they describe what banks advertise, not what borrowers sign for.
A discounted rate is the rate a lender offers a particular borrower for a particular mortgage. It reflects the term, whether the mortgage is insured, the amortization, how soon the rate is needed and how hard the lender wants the business. Two households can apply to the same lender in the same week and come away with different rates.
| Posted rate | Discounted rate | |
|---|---|---|
| What it is | The lender's published list price for a term | The rate actually offered to you |
| Where you see it | Rate sheets and the Bank of Canada's weekly posted-rate table | Your written quote, commitment or renewal offer |
| Role in a negotiation | The starting point | The number you negotiate |
| Why it matters later | Many lenders use posted rates in interest rate differential penalties | It sets your payments and interest for the term |
What the gap is worth in dollars
Take an illustrative posted rate of 6.09% and an illustrative discounted offer of 4.59% on $500,000, both five-year fixed with a 25-year amortization. The monthly payment differs by $433.39. Over the 5-year term the interest differs by $36,122, and the balance you carry into renewal differs by $10,118.
These rates are chosen to show the mechanics, not to describe today's market. The live figures are on the benchmarks page, and you can test any two rates on your own balance with the rate difference calculator or the mortgage payment calculator.
| At 6.09% | At 4.59% | |
|---|---|---|
| Monthly payment | $3,225.83 | $2,792.44 |
| Interest over 5 years | $143,301 | $107,180 |
| Balance after 5 years | $449,752 | $439,633 |
Why "below posted" is a low bar
Because posted rates are list prices that borrowers are often offered less than, a quote described as "a discount off posted" tells you about the lender's rate sheet, not about your deal. A bigger advertised discount can still leave you with an ordinary rate if the posted rate it starts from is high.
A more useful yardstick is the Bank of Canada's monthly series of effective interest rates charged on new mortgages by chartered banks: what borrowers actually received, discounts included. That is what the fixed mortgage checker uses. Scored that way, the illustrative posted rate of 6.09% gets 27 out of 100 ("grade F"), sitting 1.75% above a best published rate of 4.34%. The illustrative discounted offer of 4.59% gets 80 ("grade B"), 0.25% above the same benchmark.
- Rate
- 4.59%
- Score
- 80
- Verdict
- grade B
- grade
- B
- Benchmark
- 4.34%
- typical
- 4.83%
- Gap
- 0.25%
- Direction
- above
- Cost vs benchmark
- $5,985
Where posted rates come back: prepayment penalties
If you break a closed mortgage before the term ends, whether to sell, refinance or switch lenders mid-term, the penalty is usually the higher of three months' interest or an interest rate differential (IRD). The IRD compares your rate with a rate for the time left on your term, and many lenders build their posted rates into that comparison. Lenders must tell you how they calculate the penalty, and the key terms appear in an information box at the start of the mortgage agreement.
This is why two offers with the same discounted rate can carry very different risks. The rate decides what you pay while you keep the mortgage; the penalty method decides what leaving early costs. Our guide to prepayment penalties works through the Financial Consumer Agency of Canada's own example, and the prepayment penalty estimator lets you try your own numbers.
How to get from a posted rate to a discounted quote
The same approach works at renewal. The rate in a renewal statement is an offer, not a final price, and it can be compared and negotiated like any other quote. Our guide to reading a renewal letter and the renewal script cover that conversation.
- Ask each lender for its rate for your exact term, insurance status and amortization, and ask for it in writing.
- Grade each written quote in the checker rather than against the posted rate.
- Put a competing quote on the table and ask whether the lender can match or improve on it. The new mortgage script has wording you can adapt.
- Ask how the prepayment penalty would be calculated and which posted or comparison rate would be used.
- Confirm how long the rate is held and what happens if rates change before closing. See rate holds and pre-approvals.