Posted Rate vs Your Rate: Why Banks Advertise One Number and Offer Another">
Posted Rate vs Your Rate: Why Banks Advertise One Number and Offer Another
Meta description: Banks advertise a posted mortgage rate that almost nobody pays. See what the gap is really worth in dollars on a typical mortgage, and how to land on the right side of it.
The posted rate is a starting point, not a price
Walk past any Big 5 bank branch or open its mortgage page and you will see a posted rate: something like 6.19% for a 5-year fixed. It looks like the price of a mortgage. It is not. Almost nobody pays the posted rate. It is the number the bank starts from before the discounting begins.
Think of it like the sticker price on a car. The dealer expects you to negotiate. The bank expects it too.
Why two numbers exist
Posted rates serve the bank, not you. Historically they fed the benchmark qualifying rate used in the mortgage stress test, and they still anchor every conversation: the bigger the gap between posted and your rate, the bigger the "discount" feels. A bank would rather advertise 6.19% and offer you 4.64% ("look how much we took off") than simply advertise 4.64%.
Your actual rate, sometimes called the discounted or discretionary rate, is set by a quieter process: the bank's cost of funds, how badly it wants mortgage business that quarter, your credit profile, and whether you negotiated. Two borrowers with the same income can walk out of the same branch with different rates. The difference is usually one phone call.
The math: what the gap is worth in dollars
Let us put real numbers on a typical scenario. A $450,000 mortgage, 25-year amortization, 5-year fixed term.
At the posted 6.19%, the monthly payment is about $2,930. At a discounted 4.64%, the monthly payment is about $2,525.
The gap is roughly $405 a month. Over the five-year term, that is about $24,300 more out of your pocket for the identical mortgage, the identical house, the identical borrower. The only difference is whether someone asked for the discount.
It gets worse over the full amortization. The borrower at 6.19% also pays down principal more slowly, which means more interest compounding against them for longer. The posted rate is not a rounding error. It is a second car.
Why the bank prices this way
Three reasons, none of them mysterious:
1. Negotiation margin. The spread between posted and discounted rates is the bank's haggling room. Borrowers who shop around or push back get the discount. Borrowers who sign the renewal letter as-is fund it.
2. The loyalty tax is profitable. Renewal letters go out near posted rates because a large fraction of borrowers simply sign them. Every borrower who does is pure margin. The bank is not hiding the discount; it is waiting to be asked.
3. Segment pricing. Banks compete fiercely for new purchase business (where brokers force transparency) and coast on renewals (where inertia rules). That is why the best advertised specials are usually for new mortgages while renewal offers quietly sit higher.
How to use posted rates anyway
Posted rates are not useless. They are a benchmark for measuring your discount. When a bank offers you 4.64% against a 6.19% posted rate, your discount is 1.55 percentage points. Track that discount, not just the rate, because posted rates move with the Bank of Canada and bond markets while your negotiating skill is the constant.
A practical rule: if your discount off posted is smaller than what brokers are advertising for the same term, you are leaving money on the table. And remember that every quarter point (0.25%) on a $450,000 balance is worth roughly $60 to $65 a month, or about $3,800 over a five-year term. Small numbers on the rate, big numbers in your bank account.
A 10-minute exercise before your next renewal
Pull out your current mortgage statement and your bank's posted 5-year fixed rate, then do this:
- Find your discount. Subtract your rate from the posted rate. If you pay 4.85% against a 6.19% posted rate, your discount is 1.34 points.
- Compare it to the market. Check what other borrowers report getting this month for the same term. If the going discount is 1.55 points and yours is 1.34, you have a concrete, defensible ask.
- Convert it to dollars. That 0.21 point gap on a $450,000 balance is roughly $55 a month, or about $3,300 over five years. Now you are negotiating with a dollar figure, which is the language pricing desks respond to.
- Call before the letter arrives. Start 90 to 120 days out, when the bank knows you can leave penalty-free and will hold a competing quote that long.
Ten minutes of arithmetic turns "can you do better?" from a plea into a case.
Bottom line
Banks advertise one rate and charge another because the gap is where their margin lives. The posted rate is the ceiling; your job is to find the floor. On a typical $450,000 mortgage, the difference between posted and discounted is worth roughly $24,000 over five years. Never accept the first number.
Curious what discounted rates real borrowers are actually getting this month? Browse the live crowdsourced rate reports on fiveyear.ca and see where your offer lands.