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.