Posted by: Vince Gaetano
“In the past decade, numerous lenders have come out with a mortgage product or rate that have acted as the flavor of the month and peaked considerable interest to gain coveted marketshare in the very competitive mortgage landscape. Rate wise, these situations usually result in a lower rate of 10-15 bps and your local charter bank only matches if they are pressed to do so….chartered banks usually don’t lead they just match what a consumer can negotiate for themselves. This practice is another issue all together….more on that another time.
In the past week I’ve noticed a considerable change. There have been bold rate drops that have literally turned heads and stopped me in my tracks….a three year fixed rate priced at 2.90% with full prepayment terms by a non-chartered bank mortgage lender – the lowest market rate before this announcement was 3.44%! This 54 basis point difference is significant and an abnormality in this industry. What is actually going on?
Well, for starters, Canadian homeowners have to realize that our major banks need to earn a considerable spread between what they are paying clients in the savings accounts and what they charge homeowners for mortgages – much more spread than the lender with the great 3 Year fixed rate of 2.90% . On August 11th, the Government of Canada benchmark bond yield for a 3 year rate was 1.70% and at 2.90% a healthy spread of 110bps is still being maintained this non-chartered bank lender. How much spread do our chartered banks need??? The answer is a lot more than this mid-size lender!!! The fact is, the chartered banks need to increase profits for their quarterly investors and maintain continuous growth with their respective stock prices. Albeit, using the hard earned dollar of loyal Canadian homeowners. Stop feeding the beast!!
Outside of the big five chartered banks in Canada, there are dozens of great mortgage lenders that employ thousands of Canadians and want to save homeowner’s money. As the summer ends in the next few weeks, think about how your local bank nickel and dimes you for every direct debit, ABM charge and service fees and understand that Banker’s are always in your pocket looking to make more and more money. Mortgage brokers have access to great mortgage lenders that want your business and want you to save your hard earned money so you can pay off your mortgage faster. The only way you can access these great lenders is via your trusted and accredited mortgage broker.
At the end of the day, every $100,000 you owe, your local chartered bank will have you pay an extra $540 or more every year because the majority of Canadian homeowner’s let them. Be smart, use a mortgage professional!”