Variable Mortgage Rates Spike
A lot of borrowers can't believe they aren't being offered juicy discounts off prime rate anymore. Well, believe it. Lenders are getting absolutely pounded on variable-rate mortgage spreads.
Bankers' acceptance rates (which influence the cost of funds for variable-rate mortgages) have skyrocketed. As a result, the spread between prime rate and bankers' acceptance yields (ie. the lender's profit margin) has dwindled to 61% of what it normally is.
Check out this chart. It shows how variable rate spreads have basically fallen off a cliff.
Not long ago, you could get a nice 3/4%+ discount on a variable-rate mortgage. Not anymore. Unless this spread improves fast it's possible lenders may start charging a PREMIUM to prime rate for variable-rate mortgages.
As noted last week, if you want a variable-rate mortgage, get'em while the gettings good. There are a handful of lenders still offering better than prime.
ICICI Bank and Canadian Tire Bank are both still at prime minus 0.50%.
Posted by: Pete D. | October 03, 2008 at 11:21 AM
Hi Pete,
Thanks for the note. You're right and there are a couple of others as well--with better terms depending on the applicant. It's usually beneficial to first chat with a mortgage planner for the very best options. But make sure you pick one that works with all lenders!
Have a great weekend,
Rob
Posted by: Canadian Mortgage | October 03, 2008 at 11:49 AM
We got approval Friday for my brother's house from NATIONAL Bank for 5 year close varable mortgage @Prime-.75.
I think then we are too lucky...
Posted by: Gerry | October 05, 2008 at 05:27 AM
Unless you got that rate locked in a while ago there is no way that is true Gerry. National Bank is at prime - 1/4 and their cost of funds is as high as everyone elses. Let see the commitment letter.
Posted by: Jeff | October 05, 2008 at 01:10 PM
What does this mean for people who already have a variable rate? Should we be thinking of locking in?
Posted by: Kelly | October 06, 2008 at 10:03 AM
We closed the deal on Friday last itself.I am not against mortgae broker's,but if you have really good credit history and well aware of fine details,it pays to deal directly with banks.
Posted by: Gerry | October 08, 2008 at 01:53 PM
Hmmmm. Not quite true Gerry. Quite often non-bank lenders have far better deals than the big 6. I'd rather say it pays to deal with brokers who deal with ALL the banks.
Take care. :)
Rob
Posted by: Canadian Mortgage | October 08, 2008 at 02:25 PM