The two rates
Every major Canadian bank publishes a posted rate and quietly offers a much lower one. In the week of 16 September 2026 the posted five-year was 6.09% while the street rate was about 4.24%. A gap of 1.85 percentage points. On a $420,605 balance over 20 years that is the difference between a payment of $2,594 and a payment of $3,017 — $423 a month for a rate nobody pays.
That gap is usually described as an advertising relic, a starting point from which discounts are granted so the discount looks generous. That is part of it. It is not the expensive part.
What the posted rate is actually for
It is the number your bank plugs into the prepayment penalty formula.
The monoline and credit union method. Use the actual current market rate for the nearest term. If three years are left and the lender's three-year rate today is 4.79%, the comparison rate is 4.79%. Honest, and smaller.
The Big Five method. Comparison rate equals the bank's current posted rate for the remaining term, minus the discount you originally received — where your original discount is the bank's posted rate when you signed, minus your contract rate. Then the differential is your contract rate minus that comparison rate, times the balance, times the remaining months over twelve.
What it is worth, in dollars
A published worked example: a $420,000 balance at a 5.25% contract rate with 36 months remaining and an original discount of 1.79 points. Using a posted rate of 5.79% less the discount gives a comparison rate of 4.00% and a penalty of $15,750. Using a posted rate of 6.04% less the discount gives 4.25% and $12,600. A monoline using its real current rate of 4.79% charges $5,796. Nearly ten thousand dollars of difference on the same mortgage, on the same day, for the same borrower.
A second, independent source gives the same shape on a different example: the same mortgage with 23 months remaining costs about $3,490 at a monoline and about $11,883 at a big bank.
Two sources agree the posted-rate method costs several times the monoline method. Neither is a primary source, and the ranking between individual banks depends entirely on their posted rates that week, which move. The mechanism is solid. A league table of named banks with dollar figures is not.
Why this matters at renewal even if you will never break
Because you are about to sign a new contract, and the penalty formula in it is a term you can ask about before you sign — not after. Ask every lender you talk to, in writing: how do you calculate the interest rate differential, and do you use posted rates or your current market rates? The answer is worth thousands and it costs one email to find out.
