Mortgage shoppers put a lot of trust in the judgement of mortgage planners and bank reps.  Obviously, when tens or hundreds of thousands of dollars are on the line, it makes sense to deal only with true professionals.

To test a planner/rep’s knowledge or professionalism, ask a lot of questions.  Here are a few basic ones for starters:

1. What determines fixed mortgage rates?
2. What determines variable mortgage rates?
3. When is the next Bank of Canada meeting?
4. Where do most economists see rates going at this meeting?
5. Do you quote each lender’s (or your bank’s) lowest available rate up front?

If the bank rep. or mortgage planner can’t properly answer every one of these questions, go elsewhere.  It probably means they’re not dedicated enough to the business to research the trends and products that are in your best interests.

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Answers to the above…

1. Fixed rates are based on a spread above bond yields.
2. Variable rates are typically based on banker’s acceptance rates and priced at a discount off prime rate.  (A bankers acceptance is a short-term money market instrument backed by a bank)
3. January 22, 2008
4. Most economists expect the Bank of Canada to lower their key interest rate 1/4%.
5. If your credit is good and it’s a straightforward deal, the answer should be yes. Otherwise the bank rep. or planner is trying to play games, pocket the difference, and/or negotiate to your detriment.

Last modified: April 25, 2014