The thing no bank rep will tell you at the counter
You shop three banks for a variable-rate mortgage. All three quote you the same discount off prime — say prime minus 0.90%. Same $700,000 mortgage, same 30-year amortization, same variable product on the surface.
Then the payment quotes come back and they're not the same. Scotiabank is the lowest, TD and most other banks sit in the middle, and RBC's number depends entirely on whether you asked for monthly, bi-weekly, or weekly payments — and its weekly quote is meaningfully higher than everyone else's.
The rate is the same. The mortgage is the same. What's different is how each lender compounds interest on a variable-rate mortgage, and that single choice moves the payment.
Scotiabank — the only Big Five that compounds semi-annually on variable
Canadian fixed-rate mortgages are legally required to be quoted with semi-annual compounding — that's a Interest Act rule and it's why every posted fixed rate looks the way it does.
Variable-rate mortgages don't have the same rule. Every major Canadian bank except Scotiabank compounds their variable-rate mortgage monthly. Scotia compounds theirs semi-annually — the same convention used on the fixed side.
Semi-annual compounding produces a slightly lower effective annual rate than monthly compounding at the same nominal rate. That lower effective rate flows straight through the payment formula and gives Scotia the lowest variable payment on the street at any given quoted rate.
- →Scotia variable — compounded semi-annually (2× per year).
- →TD, BMO, CIBC, National Bank, most credit unions — compounded monthly (12× per year).
- →RBC — compounded at whatever your payment frequency is (12× monthly, 26× bi-weekly, or 52× weekly).
RBC's twist — the compounding matches your payment frequency
RBC handles variable-rate compounding differently again: they compound at whatever payment frequency the borrower picks. Choose monthly and it compounds 12 times a year. Choose accelerated bi-weekly and it compounds 26 times. Choose weekly and it compounds 52 times.
More frequent compounding means a higher effective annual rate at the same nominal rate. So an RBC variable at, say, 4.00% with weekly payments quietly runs at a higher effective cost than the same 4.00% variable at Scotia (semi-annual) or TD (monthly). The payment number the RBC advisor shows you reflects that — and it's the highest of the three.
Nobody at the branch frames it this way. You'd only notice by comparing quotes side by side and asking why the numbers don't match.
What it looks like on $700,000 at 4.00%
Same $700,000 mortgage, 30-year amortization, 4.00% variable, principal and interest. The nominal rate is identical everywhere:
- →Scotia (semi-annual compounding) — the lowest monthly payment; effective rate roughly 4.03%.
- →TD / BMO / CIBC / National (monthly compounding) — moderately higher payment; effective rate 4.07%.
- →RBC monthly payments — same as TD (12× compounding).
- →RBC bi-weekly payments — higher again (26× compounding); effective rate 4.08%.
- →RBC weekly payments — highest of the group (52× compounding); effective rate 4.08%+.
- →On a $700,000 balance, the Scotia-vs-RBC-weekly gap can be $30–$60 per month, which compounds to thousands over a 5-year term.
Want to see the gap on your own balance? Try our mortgage payment calculator and switch frequencies to watch the payment move.
So does that mean Scotia is always the right pick?
On payment size alone at the same quoted rate, yes — Scotia's semi-annual compounding gives you the lowest variable payment in the country. That's a real, structural advantage that has nothing to do with promotions.
But payment isn't the whole story. Scotia's variable is an ARM (adjustable-rate mortgage) — your payment moves the instant prime moves. Every other major bank runs a VRM (variable-rate mortgage) with a static payment that stays the same until a trigger rate is hit. Those are fundamentally different products, and we cover the full ARM-vs-VRM tradeoff in a separate post.
Discount off prime also varies by lender and by week — a slightly deeper discount at TD can wipe out Scotia's compounding advantage, and vice versa. The only way to know which lender is actually cheapest on your file is to compare all-in cost side by side, not headline rates.
FAQ
Why does Scotiabank always quote a lower variable payment than TD at the same rate?+
Because Scotia is the only Big Five bank that compounds its variable-rate mortgage semi-annually (2× per year). TD, BMO, CIBC, National Bank, and most credit unions compound monthly (12× per year). Semi-annual compounding produces a lower effective annual rate at the same nominal rate, which produces a lower payment.
Does RBC really compound based on my payment frequency?+
Yes. RBC's variable-rate mortgage compounds at whatever payment frequency the borrower chooses — 12× per year on monthly payments, 26× on bi-weekly, 52× on weekly. More frequent compounding means a higher effective rate, which is why RBC's weekly payment quote at the same nominal rate is higher than TD's monthly quote and much higher than Scotia's.
Is semi-annual compounding on a variable mortgage a promotion or a permanent Scotia feature?+
It's a permanent product feature at Scotiabank — not a limited-time offer. It's baked into how Scotia's variable-rate mortgage is contractually structured.
Does compounding affect fixed-rate mortgages the same way?+
No. Canadian fixed-rate mortgages are required by the Interest Act to be quoted with semi-annual compounding, so every lender is on the same footing. The compounding differences only show up on variable-rate products, which the Interest Act rule doesn't cover.