Mortgaging near the Edge

Mortgage-Rate-Holds People aren’t locking in mortgage rates far enough in advance.

That’s the conclusion of a new study by ING. 

ING’s research was performed by Angus Reid and they found the following:

  • 40% of Canadian mortgagors surveyed said they secured their mortgage rate just 30 days or less before closing.
  • 27% waited until 31-60 days before closing.
  • Those who instead locked-in 120 days in advance saved 0.18%–or $1,800 over five years–on average. (Assuming a $200,000 mortgage and 25-year amortization)
  • 27% of mortgage holders let their mortgage auto-renew without researching a better rate.  Disgraceful!  In Quebec the number was 36%.

ING VP of Lending, Marting Beaudry, says, “Securing a rate guarantee, even before you start looking for a new home or your existing mortgage comes up for renewal, is a quick and simple way to save your money on mortgage interest payments over the long term.”

That is absolutely true and ING has one of the best rate-holds in the business.  However, borrowers are far smarter than some give them credit for.  They’ll likely find an even better way. 

People know that 30-day “quick-close” specials are where they’ll get the best rates. It is not a stretch to foresee borrowers making increasing use of rate-holds as a free option, and then moving their application to whomever has the best “quick-close special” for their needs once they’re within 30-days of closing.

It’s a practice that may tick off a lot of lenders because there are real costs involved in underwriting applications and hedging rate holds.  Cancellations are expensive.  If adopted en masse, this could also throw many mortgage planners’ “funding ratios” right out the window.

  1. In “rate-stable” or “rate-decending” situations (such as we’ve been experiencing..) this issue is a non-issue. It must be nice to have a job where you can “survey the obvious” & then “report the findings”…& get paid for it !! P.

  2. Hey Paul….what?
    Smart Lenders (and BDMs with princing discretion) will begin to adopt a rate match policy to save deals that might skip to other lenders with quick close specials lower than previously pre-approved rates. In many cases, this would be a reasonable cost outlay for the lender, and would help retain both the client and broker (who has a fiduciary duty to find a client the best terms).

  3. Paul are you serious? If you’re in the business and making comments like that then you’ve got to check yourself buddy. You’re coming across pretty condescending for a guy who puts his website on public display.
    What do declining rates have to do with it? Who knows where rates are going to be next week let alone next month.
    What this article reports as a future possibility, I am seeing today! I have customers calling three weeks before closing quoting a rate they saw on so-and-so website. People watch rates like a hawk these days and more and more think they can switch lenders at the last minute.
    This is very much an issue and it should be a point of concern for our industry. I’m frankly surprised this site brought up the topic but it’s a necessary dialog so I’m glad they did.

  4. I am very much in this situation my self. I have an application ready for my signature at a rate of 4.26% for 5 years. My closing is May 29th, 2008.
    I told my broker that I saw a deal for 3.8% for 5 years (no frills). Only problem that is that it is a quick close so I can only submit for that on April 29th.
    So I put my broker on notice that if he can’t do better then 4.26% then I will have to go for the better deal as it can save me alot of money on interest payments.
    I will see what happens.

  5. Why would you even consider 4.26% for 5 years, ing offers 4.05 with all the frills, your broker is not looking after your best interest rate needs.

  6. In all fairness, this was pre-approved in February before many fixed rates drop. The lender will drop their fixed rate on April 1st. If it is still higher, I will jump ship.

  7. Johnathon,
    That is quite presumptuous of you to cast doubt on this person’s broker. There are countless reasons why the borrower might have been quoted a particular product. A prior rate hold is just one reason. You know nothing about this client’s needs or background. This type of groundless criticism adds no value to this site. Take your agenda elsewhere.

  8. Hi, I have been reading a lot on this site and others about mortgage types, rates, future predictions and so on. My mortgage is up for renewal in 2 months (May 30th) and i am looking for some opinions on my situation.
    I was offered 4.29 at my current bank when the advertised special rate was 4.49 and now the the rate has dropped to 4.25, that is the lowest I am currently being offered. I haven’t requested the services of a mortgage broker yet but briefly talked to a representative from CENTUM at the Halifax Home Show in which he told me they are currently offering 5 years at 3.99, but unsure of the conditions/flexibility of the product. I am expecting to meet with him sometime this week.
    Right now, the best interest rate is what appeals to me, because I will not have the extra cash flow to make additional payments within the next 5 years while I am repaying hefty student loans. After that I would be more inclined to go with a product that has good flexibility.
    I have been reading about the quick closing rates that people are getting….should I wait to take advantage of that or seek the help of a mortgage broker now. Your opinions are appreciated. Thank You

  9. Len, get a grip, going off the feedback of the writer, he is inquiring about rate, it was stated that he can do better than 4.26%–DISCLAIMER–IF he is an “A” client. Agenda? Defend brokers to the death Len, broker’s do get paid to place deals right, and they do make more with certain lenders, right, get a grip.

  10. Cory – have a broker take your information, set up an application, but NOT submit it to a lender. Have the broker monitor the market (in case things start to go up), and 30 days prior to renewal you’ll be elegible for a quick close.
    Call your existing institution prior to any of this and tell them this is their last chance to retain your business (early renew you effective IMMEDIATELY at the current best rate your broker can get). If they will not honour the best rate now, commit to your broker and don’t look back.
    Discuss your EXACT mortgage plans with the broker, and ask about lock-down clauses (the ability to leave the mortgage without a sale), payment options, transfers vs refinances, and potential portability.
    Hope this helps.

  11. Hello,
    I have my home for sale, and am curious about porting my mortgage. I have 5 year term variable at prime -0.6 just started last Sept and I would like to port it. Should I speak to my broker (who did this mortgage) or the lender. I am moving from Alberta to BC. The loan papers specify that porting between he two provinces is aloud. My house is newly listed but would like to get my options sorted before I reach the “Edge”
    Thanks

  12. Hi Go West….
    If you are increasing your mortgage amount, the broker might be able to help you, but depending on the lender you might have to have to go with today’s variable rates (prime plus x) on the full amount.
    If you are doing a straight port (keeping the amount the exact same), you will likely be able to keep your mortgage rate the exact same – That said, you should contact the lender directly and see what their policy is regarding how the 2 closing dates must coincide (same day, 30 days, 90 days, etc).
    Hope this helps.

  13. if a broker has arranged to port my mortgage with current lender, nothing has changed as far as rate etc., do they get paid by lender? if broker claims NO can they in turn charge the client a fee? and additionally, a cash deal? What are the repercussions?

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