Strategy•Verified 2026-02-18
What is the 'IRD' penalty risk for 5-year fixed borrowers?
The Interest Rate Differential (IRD) can cost tens of thousands if you break a fixed mortgage when market rates have dropped.
Technical Research Verification
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Related Questions
How does the stress test differ for fixed vs. variable in 2026?
Both are stress-tested at the higher of the benchmark (5.25%) or the contract rate + 2%.
Why are 3-year fixed rates dominating the 2026 market?
Borrowers are hesitant to lock in for 5 years at current levels, but find 1-2 year rates too expensive.
Fixed vs. Variable Comparison Table
Fixed locks a 5-year rate with IRD penalty risk; variable floats with prime and typically caps break fees at 3 months interest.
How do prepayment privileges work, and what are the limits?
Prepayment privileges allow borrowers to make extra payments on their mortgage without penalty, up to a certain limit.