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Pre-payments Less Critical Now: Prospera

Prospera “The ability to make lump sum [mortgage] payments is much less critical to the consumer – especially in today’s economy.” 

That’s the conclusion of Prospera, a prominent BC credit union.

Prospera commissioned a survey of 603 BC adults in April.  The poll was conducted on Prospera’s behalf by Ipsos Reid. 

Among other things, it found:

  • 60% of respondents under 45 years old said they’d be willing to forgo some mortgage payment flexibility in exchange for a lower interest rate.
  • 59% were unaware that mortgage rates are typically higher when large lump-sum pre-payment privileges are offered.
  • Mortgage payments comprise about 25% of the average Canadian family’s monthly expenses.

These figures seem believable enough.  From the inquiries we get, most borrowers seem less and less concerned about big pre-payment privileges, despite their potential value

On the other hand, people do seem to want at least some level of pre-payment ability (5-10% for example).  Very few tell us they don’t care about pre-payments “at all.” 

(Then there are those who absolutely must have a 15-20% lump sum pre-payment option.)

Not coincidentally, in conjunction with releasing these survey results, Prospera launched a brand new no-frills mortgage.  It’s geared to people who “know they will not take advantage of pre-payment privileges and would rather have a lower interest rate.”  Prospera calls it the myStyle Mortgage and it’s currently priced at 3.59% for a 5-year fixed. 

The myStyle Mortgage is just the latest in a series of no-frills launches over the past year.  It’s been said before and we’ll repeat it.  No-frills mortgages are a growing trend and lenders who don’t offer them will give up a lot of revenue over time.