The Globe & Mail ran a story Tuesday about variable-rate mortgages. It suggested homeowners are shunning them due to the high premiums most banks are charging above prime rate.
That is indeed true–for most variables.
However, it is worth noting that a few variable-rate mortgages are still at prime rate.
Homeowners are not only not shunning these lenders, they are stampeding to them. One such lender has an 8-day backlog of deals at the moment because of all the applications it is receiving.
The Globe’s story also discusses Scotia’s 4.35% one-year mortgage as an alternative to variables. With open variables around at 4.00%, however, 1-year mortgages simply aren’t that attractive in our view. Besides a 0.35% rate advantage, the best current variable-rate mortgages offer:
- No penalties if you leave the lender before the 5-year term is up (This is handy if, 6 months down the road for example, you see better rates somewhere else. With a 1-year mortgage you’re locked in for that entire year.)
- Interest savings if prime rate declines in the next 1-2 quarters–as most economists expect
- Interest cancellation (i.e. your chequing/savings balances can reduce your mortgage interest due)
- The ability to lock into discounted variable rates if/when they reappear
- The ability to readvance credit–if needed–as the mortgage is paid down
- The ability to make interest-only payments if you get in a short-term cash crunch
In short, the best variable-rate mortgages are still very much in play.
Contact any mortgage planner for further details.
Last modified: April 29, 2014
Are you referring to an open variable rate mortgage here, or a product like the Canadian Tire One & Only account?
Hi Pete,
At the moment there is at least one regular variable-rate mortgage and two all-in-one type mortgages out there at prime. CT is one of them. National is another. Of the three, the all-in-one has the most flexibility.
Cheers,
Rob
This article was so easy to understand and very helpful. Thank you for the information.
Thanks for such a great informative blog!
Question – is there a chance that a bank or lender will NOT automatically renew a mortgage for a client at the end of their term?
And if so, is this more likely in a depreciating real estate market?
Thanks for your time!
Mike, if the customer has had issues with late payments in the past-nsf’s, then the lender could demand payout, if the customer has made payments as required more than likely it would be re-newed unless the lender is no longer in business then they would want to be paid out.
Thank you for this information. Which banks besides National Bank are offering the variable product at prime? Up to what LTV?
Their guidelines at least for National Bank are tight
Hi Samantha, I just posted the following on another thread and will copy it here…
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National Bank and Canadian Tire both have prime. Although only National will pre-approve clients and lock their rate at prime (for up to 90 days).
National’s All-in-One mortgage/HELOC is available through mortgage planners as well. It also has a few other unique perks besides the best rate. Any mortgage planner can provide complete details.
There are also other lenders that do exceptions to prime or below. We don’t post them, however, because they don’t like to promote these exceptions publicly.
Cheers,
Rob
How can they afford to offer a HELOC at Prime? Aren’t they losing money on it?
Or is there a premium on the other revolving accounts in the AllinOne / OneAndOnly structure?
A quick update to my prior post:
We heard late today that National has halted pre-approvals on their HELOC for the time being. We are confirming…
Hi Mike,
To be honest I’m not sure what National Bank is making on their HELOC right now, but I do know that it’s a market share play. They’re picking up a ton of business at the moment.
Rob
I just checked both CT and National’s websites and both say their variable rate is Prime+1%. Am I missing something???
Thanks,
John
Hi John, It’s their all-in-one accounts that have price rate.
Cheers,
Rob