What’s the catch on the 1.99% 6 month interest rate?
“Extra! Extra! Get your 1.99% mortgage rates! You’d be silly not to!”
Lenders are getting clever, really clever, with how they market mortgage rates in 2025.
You’ve probably seen ads shouting: “1.99% mortgage rate!”
Sounds like a dream, right?
But there’s a catch. A big one.
Let’s break down what these teaser rate offers really mean - and why they could cost you more in the long run.
Why Are Lenders Offering 1.99% Rates? Aren’t they losing money on it?
Because they know what grabs your attention. And I’m here today also proving that it does work to do that.
These 1.99% offers are short-term teaser rates - typically for six months - designed to make you think you’re getting the deal of a lifetime. In reality? You’re being lured in with a bait-and-switch.
I sat in on a private session with a lender offering this exact promo (with slightly different rates) and here’s what they told us directly:
The Fine Print (That Nobody Reads)
Here’s how these teaser mortgages work:
They’re meant to “wait out the high rates.” The pitch is that you take a super low 6-month term while rates are high, then renew later when rates drop. Or making it easier to qualify for your purchase (since the qualifying rate is much lower).
But here’s the catch: at renewal, you’re locked in. If you don’t renew with that same lender, you pay a 1% penalty on your mortgage balance. Ouch.
Since you’re strongarmed to stay, why would they offer you the best rate? They won’t - because they know you can’t easily leave. They bought your mortgage with the teaser rate - knowing that if you’d pay out, it would be more than the 6 month interest savings.
And what about your broker? They get a small commission upfront, and a bigger payout when you renew. So even your broker isn’t incentivized to fight for you or switch you to a better deal - knowing that it’s an uphill battle to convince you to take the penalty, and redo all the paperwork as well to take you elsewhere for a reasonable rate.
Some lenders even market it as an “easy file” for brokers. Hands off. No paperwork at renewal. Done deal.
This Is Exactly What Helped Sink the U.S. Market in 2008
If this sounds familiar, it should.
In the lead-up to the 2008 financial crisis in the United States, banks offered teaser rates that seemed too good to be true - because they were.
Buyers were lured in with ultra-low initial payments and the promise of being able to refinance before rates jumped. The problem? When the time came to renew, rates had risen, home values had dropped, and refinancing wasn’t an option anymore.
People were trapped. Their payments skyrocketed. Many defaulted. And it triggered a housing collapse that shook the global economy.
Canada didn’t play the same game back then. But seeing these teaser-rate offers return - especially in today’s uncertain market - should raise red flags.
Because the risk isn’t just the rate. It’s what happens when that rate expires - and you’re stuck with a lender that knows you can’t leave without paying a penalty.
Are There Any Benefits?
Sure — but only in very specific cases:
If you’re tight on debt ratios, you may qualify more easily at a 1.99% contract rate.
You don’t need to requalify when the teaser term ends. You’re already in the system.
But here’s the problem:
That only helps if you can afford the real rate you’ll get after the teaser ends.
Most people don’t realize how steep that jump can be.
And it’s not my style to shoehorn you into a mortgage that isn’t aligned with affordability and your life goals.
I’m setting you up for success, and I fear that there’s a chance this unknown rate at renewal is so scary.
So… Should You Take a Teaser Rate?
Not unless you’re desperate.
This product is a trap. It’s designed to lock you into higher rates later, when you’ve got no easy way out.
It looks shiny on the surface, but underneath, it’s all hooks.
If your mortgage plan includes 1.99% for six months followed by a mystery renewal rate you can’t control… you don’t have a mortgage plan.
You have a gamble.
Still want to go forward with one of those teaser rate offers?
Here are some questions you should ask your lender and broker:
What is the fee for not renewing with you when the 6 month term is up?
Do you have any guarantees as to what my rate will be for a 3 year or 5 year term at maturity of this teaser rate?
Can you calculate the savings for my 6 month term, versus the fee for not renewing?
Can you advise the current renewal rates for these mortgages, versus what’s out in the market today?
Final Thoughts
I’m not here to dazzle you with bait-and-switch rates.
I’m here to help you build a mortgage strategy that actually fits your goals, without the landmines.
Here’s 3 ways we can get started to avoid those landmines.
Want clarity on teaser rates or smarter mortgage options? Book a free call.
Want to know what you truly qualify for? Send me your numbers and I’ll show you - zero BS.
Want me to monitor your rates on your behalf to know if there’s a better rate out there? Let’s check if there’s a better option for you!
Let’s do this right. With a plan that you’re not going in blind.