Rate Lock

Rate lock is an agreement that fixes the interest rate on your mortgage for a set period, protecting you if rates rise before your mortgage funds. The lender commits to lending at that rate on the agreed terms, and the borrower commits to that rate, provided the deal closes within the lock window.

How a rate lock works in Canada

A rate lock usually begins once a lender approves your application and issues a mortgage commitment. The commitment letter sets out the locked rate, the length of the lock, and the conditions attached to it. The lock generally runs up to the closing date, and its length is a lender policy rather than a government rule, so confirm the exact window in your own commitment.

Because most Canadian mortgages are priced off the lender's posted rate less a discount, what gets locked is your discounted contract rate, not the posted rate. On a fixed-rate mortgage, the locked rate becomes the rate you pay for the whole mortgage term.

Rate lock vs rate hold

The two terms are often used interchangeably, but they sit at different stages of the process.

• Rate hold — offered at the pre-approval stage, before you have a property. It holds a rate while you shop and is not a commitment to lend.
• Rate lock — confirmed at approval or commitment, tied to a specific property, purchase price and closing date.

See Mortgage Rate Holds and Rate Locks for the full sequence.

What can break a rate lock

A lock is conditional. It can lapse or be withdrawn if:

• the closing date moves past the end of the lock period;
• your financial situation changes, such as income, employment or new debt;
• the property appraisal comes in below the purchase price;
• the conditions listed in the commitment are not met.

If the lock expires and rates have risen, the lender may re-price the mortgage at the then-current level.

Why it matters to borrowers

Rate locks matter most when rates are volatile or rising, because they turn an unknown future payment into a known one during the purchase window. That certainty also supports planning: under the federal mortgage stress test, lenders qualify you at a higher rate than your contract rate, so knowing your contract rate early helps you budget. A rate lock is not a guarantee of approval — final approval still depends on underwriting, income verification and a satisfactory appraisal.