If you're thinking about buying a home or refinancing in Ontario, one of the first things you'll hear about is interest rates. They come up in every conversation, every news article, and every mortgage ad. But what exactly are they? And more importantly, how do they affect you?

Let’s break it down in plain terms.

Interest is the cost of borrowing money. When you get a mortgage, you're borrowing a large sum from a lender, and interest is what they charge for letting you use that money. It’s like paying rent on money.

Now, in Canada, mortgage interest rates are influenced by a few key things. The first is the Bank of Canada’s overnight lending rate. This is the rate that banks use when they lend money to each other. When this rate goes up or down, it tends to impact the rates banks offer to consumers. For example, if the Bank of Canada increases their rate, variable mortgage rates often go up soon after.

Another factor is the type of mortgage you choose. There are two main types: fixed-rate and variable-rate.

With a fixed-rate mortgage, your interest rate stays the same for the entire term. This makes budgeting easier because your payments won’t change. It’s great for people who like stability and want to avoid surprises, especially if you’re planning to stay in your home for a while.

A variable-rate mortgage, on the other hand, can fluctuate. These rates are usually lower to start, but they can go up or down depending on market conditions. If you’re comfortable with a bit of risk and believe rates will stay low, this could be a smart option.

Your personal financial situation also plays a role. Lenders look at your credit score, income, debt levels, and employment history. The better your financial picture, the better the rate you’ll usually be offered.

It’s also worth knowing that posted rates—the ones you see online or at the bank—aren’t always what you’ll end up paying. A mortgage agent like me can help you access discounted rates through lenders you might not find on your own. That’s one of the key benefits of working with an agent instead of going directly to a bank.

And remember, interest rates don’t just affect your monthly payment. They impact how much interest you’ll pay over the life of your mortgage. Even a small difference in rate can add up to thousands of dollars over time.

At the end of the day, understanding interest rates helps you make smarter decisions. Whether you're buying your first home, moving up, or refinancing, knowing how rates work puts you in control.

If you ever want to chat about what rates are doing or explore what makes the most sense for your situation, I’m here to help. It’s my job to make mortgages easier to understand and to make sure you’re getting the best deal possible.