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The 35% federal rate cap applies everywhere in Canada, but provinces differ on licensing and lender obligations.
| Province | Rate cap | High-cost credit licensing | Regulator |
|---|---|---|---|
| Alberta | 35% APR | HCC licence for products >=32% APR | Service Alberta, Consumer Protection Act Payday Loans Regulation |
| British Columbia | 35% APR | HCC licence for products >=32% APR | Consumer Protection BC, BPCPA Part 6.1 |
| Manitoba | 35% APR | HCC grantor licences exist | Consumer Protection Office, Manitoba |
| New Brunswick | 35% APR | No separate provincial high-cost credit licensing band; federal 35% APR cap governs | Financial and Consumer Services Commission |
| Newfoundland and Labrador | 35% APR | NL HCC regime recent | Digital Government and Service NL |
| Nova Scotia | 35% APR | None | Service Nova Scotia |
| Ontario | 35% APR | None | Consumer Protection Ontario |
| Prince Edward Island | 35% APR | None | Consumer Services PEI |
| Quebec | 35% APR | high-cost regime: rate > BoC rate + 22 pts triggers added obligations incl. ability-to-pay assessment | Office de la protection du consommateur |
| Saskatchewan | 35% APR | None | Financial and Consumer Affairs Authority |
| Northwest Territories | 35% APR | None | NWT Consumer Affairs |
| Nunavut | 35% APR | None | Nunavut Consumer Affairs |
| Yukon | 35% APR | None | Yukon Consumer Services |
Four gates, in the order a lender applies them.
The stress test. Federally regulated lenders qualify you at the greater of your contract rate plus two percent or the qualifying rate. You are approved on a payment you are not making, which is why bank approvals come in lower than borrowers expect.
Down payment and insurance. Under 20 percent requires default insurance. Between 5 and 20 percent, the premium is added to the mortgage rather than paid upfront.
Debt service ratios. Gross debt service covers housing costs against income. Total debt service adds every other obligation. Lenders publish thresholds and the total ratio is the one that fails most applications.
Income provability. The gate that sends most applicants to alternative lending. Self-employed and commission income is real and frequently unprovable in the form a bank requires.
| Tier | Who | When it applies |
|---|---|---|
| A lenders | Banks and federally regulated institutions | Provable income, strong credit, passes the stress test |
| B lenders | Trust companies, credit unions, monoline | Provable but non-standard income, or credit below bank thresholds |
| Private | Mortgage investment corporations, individual lenders | Equity-driven, short-term, when neither tier fits |
Rates rise across the tiers and so does flexibility. The tier is decided by which gate you fail, not by how much you want to borrow.
Fixed gives a known payment for the term and a penalty structure that can be expensive to exit. Variable moves with prime and generally carries a cheaper exit.
The exit penalty is the part most comparisons skip. Breaking a fixed mortgage early is calculated on an interest rate differential, which on a large balance can run into five figures. Breaking a variable is usually three months of interest. If there is a realistic chance of moving or refinancing mid-term, that difference frequently outweighs the rate gap.
Five percent on the first $500,000, ten percent on the portion above it, and twenty percent on properties at or above $1 million.
Qualification at the greater of your contract rate plus two percent or the qualifying rate, so approval is based on a payment above your actual one.
Yes, and it frequently means a B lender rather than a bank. The obstacle is proving income in the form a federally regulated lender requires, not the income itself.
A lender outside federal regulation with more flexible income and credit criteria, at a higher rate than a bank.
