5-Year Rates Finally Fall, But Not By Much

Falling-5-year fixed-mortgage-ratesAfter four weeks of falling bond yields, banks are throwing us a bone.

RBC just announced a 0.10 percentage point drop to its 5-year fixed rates, effective tomorrow.

Its posted rate (which other banks should match) is falling to 5.59%.

RBC’s “special offer” rate will now be 4.44%, but well-qualified borrowers should expect less than 4.00% on the street.  Most brokers have had 5-year rates under four percent for several days.

Despite the skimpy rate drop, spreads are not egregious by any means. The posted-5-year bond spread is now sitting at 308 basis points. That almost exactly matches the average over the last year.

Interestingly, RBC is also promoting 18- and 24-month rate holds for new builds (only). Those rates are 4.84% and 5.04% respectively for 5-year fixed terms, but RBC mortgage specialists can do better.  RBC also offers a 36-month hold at posted (5.59%).

This is notable only because we haven’t seen 1.5- to 2-year rate holds advertised (in press releases) very often. RBC is clearly trying to get to the customer early, which raises its probability of closing that homebuyer.

TD is another big player in long-term rate holds, an area where banks still hold a major advantage over brokers.

Rob McLister, CMT

  1. Does anyone know which institution is offering 3.89% for 5yr Fixed with a full 120 rate hold?
    (Not a no frills type, but a regular mortgage)

  2. Rob,
    Silver Line Mortgage Group in Ontario was offering 5yr 3.59% on Mar 21 2011. Not sure about hold, call them for details.
    I worked with them on my mortgage – very straight transaction. Recommend to everyone!
    Hope it helps.

  3. Is the rate for real? Rob M, Do you know anything about these guys? Never heard of them, but that rate is amazing!

  4. Dan,
    Silver Line Mortgage Group is a real brokerage company. I’m not sure how can you verify it from your side, but I personally worked with them in February 2011. In my own opinion, if you get better rate why to look further. They gave me the best rate from number of brokers, I called. Even for the same financial institution their rate was better (less 0.2%). How they did it? I have no idea. I don’t like when people pay more when you can get it for less and will be glad if somebody will get better deal.

  5. Hello Mark
    Thank you for finding that amazing rate!
    Silver Line Mortgages is the brokerage who booked your mortgage. If you look at your paperwork, it will say the actual name of the Lender (the financial institution) who funded your deal. That is the key piece of information we need
    Thank you so much again

  6. Hi Dan, I’m not sure who SLMG is. I noticed their rate page hasn’t been updated since March 21. Rates at many lenders increased on or around April 5, so I’m not sure if that quote is accurate. Awaiting their confirmation….

  7. Even though posted rates have decreased only now, discounted rates have been down for the past two weeks. ING and MCAP went from 4.29% to 3.89 for a 5-year fixed. Merix has an even lower rate if you can close quick. And if you happen to be on the west coast, Coast Capital’s 3.65% 5-year rate is virtually unbeatable. TD, RBC, and Scotia, however, are still at 4.39% for their “special offer” rates. This shows the importance of shopping around and bring informed about what’s available out there.

  8. Hi Mark and Dan,
    The reason you can get a slightly better rate with one broker over another, through the exact same institution, is because some brokerages have volume bonuses, meaning they may get a .10 % bigger discount, which they pass on to their customer. If one brokerage has 3 brokers referring business to ‘the lender’, and another has 50 brokers sending business their way, they sometimes offer a better discount to the bigger office. The broker wins, because he can beat the rate being offered down the street, and the customer wins too! Note: bigger isn’t always better. There’s lots of brokerages out there with a small amount of brokers working out of it, but they do so much business, they get the bonus’ too. It’s all above board; no sneaky stuff going on. Brokers are the way to go.

  9. I think that ING rate you quoted is wrong. Orange Plus brokers get the best discounts. They are at 3.99%, not 3.89%.

  10. Hi Rob,
    The lender is Industrial Alliance.
    The mortgage is no frills type. I’m familiar with all their restrictions and prepayment options. To get a better rate in exchange for limitations is a fair deal.
    Let us know if you find any good deals in Ontario.

  11. Very well said, Keren.
    I’d just like to quickly add that lenders these days tend to put a lot of emphasis on closing ratios. In other words, when they issued 10 commitments to a particular brokerage, how many of these 10 deals actually closed?
    For the lenders, it’s all a matter of time and money, and the agents and brokerages who are most fluid with their closing ratios (and application packaging) get favourable pricing, above and beyond what’s published, as an incentive to keep it up.

  12. Hi Karen,
    Interesting insight into volume bonuses and something for buyers to bear in mind. In the insurance industry this issue has generated a lot of bad press as it seems to create a potential conflict of interest – brokers steering business to bolster their volumes rather than on the basis of their customers’ needs.
    Pros and cons, I guess.

  13. Hi Rob,
    Just came across 3.59% for 5yr fixed…
    Well, it looks like 5 yr fixed getting better even there prime will go up in September/October.
    [Edited. Feel free to post lender links but kindly avoid posting broker links and phone numbers. Otherwise the site will be overrun with spam. Thank you for your understanding. – Elizabeth, CMT]

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