We recognize that recent Bank of Canada’s rate changes have impacted some of our variable rate mortgage customers. We’re here to help support and guide our customers through this unique environment. Here are some details that might be useful:
What impact do increasing rates have on your variable rate mortgages?
When interest rates increase, it often means it would cost more to borrow and for customers with variable rate mortgages, the interest portion of the instalment payment will also increase.
If your instalment payment is not enough to cover the interest on your mortgage, you have reached your threshold rate (also known as the “trigger rate”). At this point, the instalment payment may need to increase to ensure you continue to pay down your mortgage according to the amortization period stated in your initial mortgage agreement.
When will HSBC increase my instalment payment?
If your threshold rate is higher than your effective rate, that means your current instalment can still cover the interest payment. When your threshold is equal to or lower than your effective rate, that means your current instalment payment is not sufficient to cover the interest payment. HSBC will need to increase your instalment payment so that you pay down your mortgage according to your amortization schedule.
What options do I have to avoid hitting the threshold rate?
There are some options available that could help, such as increasing your instalment payment or making a lump sum payment. We encourage you to speak with your branch or relationship manager who can guide you through your options and confirm your current threshold rate.
How are we communicating to our customers?
We are sending an advance notification to all potentially impacted customers. The notification tells customers that once they pass their threshold rate, we will increase their instalment accordingly.
If your mortgage passes its threshold rate when HSBC’s Prime Rate changes, we will send another notification detailing the changes to your instalment amount and a new Cost of Borrowing statement. You should receive this within 30 days after the instalment payment change.
If you want to discuss your payment options or have any questions about your variable rate mortgage payment, please reach out to your branch or relationship manager. You can make a branch appointment at hsbc.ca/book-appointment or through the HSBC Canada app.
For additional information on how interest works and how this may impact you, please visit the FCAC’s mortgage information and tools.