When to find the most completive mortgage rate of the year
by Neil Sharma 23 May 2019
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When to find the most completive mortgage rate of the year
According to data compiled by Ratehub.ca, the spring buying season is the best time of year to get a competitive rate from A lenders.

The data suggests the most aggressive five-year fixed rate lenders offered between January and March 2016 was 2.39%, while the variable averaged 2.09%. However, those rates dropped to 2.33% and 2.04%, respectively, between April and July.

By 2018, when interest rates began climbing, lenders promoted lower-rate deals. The average five-year fixed rate rose to 3.07% between January and March—although lenders did slash them—and the variable rate declined from 2.17% to 1.96%.

“It seems to us—and our data supports this—that during the spring time is when lenders usually get the most aggressive with rates,” said James Laird, Ratehub co-founder. “There are obviously other factors at play, but all else being equal, lenders offer the most deals during spring home buying season. We definitely saw more dips during the spring.”

That’s good news for borrowers in a rising rate environment. While rate hikes have ceased, however temporally, the Bank of Canada is determined to establish an upward trajectory.

Laird suggests that consumers with mortgage flexibilit, adopt the seasonality approach when shopping for the best interest rate.

“During this period, many lenders will choose at least one rate and term to price very aggressively in order to attract attention to all of their mortgage products,” continued Laird. “Lenders also come out with special promotional offers to incentivize borrowers to lock in a rate. Consumers can expect to see cash-back deals to help with closing costs and refinance fees. Some lenders offer extra-long rate holds during this period. For example: BMO is currently offering a 130-day rate hold. The ’30-day quick close rate’ is another promotion many lenders opt for—this is a discounted rate that applies if your mortgage is closing in the next 30 to 45 days.”

A major reason lenders become so competitive during the spring season is to hit their annual mortgage volume targets, which they often hit during the second quarter of the year. When that happens, rates subsequently become less competitive.

“Consumers will typically see rates fall again in October,” said Laird. “All of Canada’s major domestic private banks end their fiscal year on October 31. Lenders that want to get an early start on their targets for the next year will come out with their promotions during this time period.”

A new survey has emerged showing that out of 1,901 owners and would be homeowners, 43% (more than two out of five) Canadians are not confident in their knowledge of the mortgage stress tests—despite them being in place for more than a year now.

We wanted to give you a brief set of notes regarding the guidelines. This is something you can use and reference whether you are a first-time home buyer or looking to refinance underneath these new guidelines. It gives a clear picture of what/how you are impacted as a buyer or someone who is looking to refinance.

Here’s what you need to know about B-20:

The average Canadian’s home purchasing power for any given income bracket will see their borrowing power and/or buying power under these guidelines reduced 15-25%. Here is an example of the impact the rules have on buying a home and refinancing a home.

PURCHASING A NEW HOME

When purchasing a new home with these new guidelines, borrowing power is also restricted. Using the scenario of a dual income family making a combined annual income of $85,000 the borrowing amount would be:

Up To December 31 2017 After January 1 2018
Target Rate 3.34% 3.34%
Qualifying Rate 3.34% 5.34%
Maximum Mortgage Amount $560,000 $455,000
Available Down Payment $100,000 $100,000
Home Purchase Price $660,000 $555,000
REFINANCING A MORTGAGE

A dual-income family with a combined annual income of $85,000.00. The current value of their home is $700,000. They have a remaining mortgage balance of $415,000 and lenders will refinance to a maximum of 80% LTV. The maximum amount available is: $560,000 minus the existing mortgage gives you $145,000 available in the equity of the home, provided you qualify to borrow it.

Up to December 31, 2017 After January 1 2018
Target Rate 3.34% 3.34%
Qualifying Rate 3.34% 5.34%
Maximum Amount Available to Borrow $560,000 $560,000
Remaining Mortgage Balance $415,000 $415,000
Equity Able to Qualify For $145,000 $40,000
Source (TD Canada Trust)

These guidelines have been in place since January 1, 2018 and we are starting to see the full impact of them for both buyers and those looking to refinance. Stats are showing that there is a slowdown in the real estate market, however there is also a heightened struggle for many buyers to now obtain approval under these new guidelines. It’s a difficult situation as the cry for affordable housing is still ongoing as the new guidelines may slow down the market but appear to further decrease the borrowing/buying power of individuals.
Keep in mind, this is just a brief refresher course on the B-20 guidelines. As always, if you have more questions or are looking for more information, we suggest that you reach out to your Dominion Lending Centres mortgage broker to discuss and get a full and detailed look at how it will impact you personally.

Geoff Lee
GEOFF LEE
Dominion Lending Centres – Accredited Mortgage Professional
Geoff is part of DLC GLM Mortgage Group based in Vancouver, BC

If you’re looking to get a mortgage and considering a mortgage broker, there’s a good chance you’re wondering about how much the service costs.

Good news! Clients looking to get a standard residential mortgage pay no fees to the broker.

On standard residential mortgages, it’s 100% free for the clients. We’re paid by the bank or by the lending institution that we give the mortgage to.

But it’s not the only advantage a broker can bring you. When you’re shopping for a mortgage at a bank, they’re only able to offer you something from their stable of products. A broker, however, is able to shop at different banks to get you the best product for your needs.

If you don’t fit in the bank’s box of products, then you don’t get the mortgage. When you go to a mortgage broker, the mortgage broker has access to every lender on the market and is able to sell you basically everything to find a solution that makes the most amount of sense for you.

Because they’re able to shop around, in many cases the broker is able to find you a better rate on your mortgage.

In addition, mortgage brokers are licensed professionals covered by provincial governing bodies that looks out for you, the consumer. In many cases, the person you’re dealing with at the bank is just a salesperson, without any requirement they be licensed.

So, if you’re in the market for a new home, try a mortgage broker. It’s the safer, smarter choice for your mortgage. We’d encourage you to shop around, then get in touch with us for a no-obligation chat with a Dominion Lending Centres mortgage professional near you.

TERRY KILAKOS
Dominion Lending Centres – Accredited Mortgage Professional