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Where the “Deals” Are

mortgage-shoppingAs rate comparison websites evolve, something interesting will happen. Lenders and brokers will realize how easy it is to put special offers in front of thousands of eyeballs.

As new competitors see this, they’ll join the online fray and rate discounts will slowly improve…one basis point at a time.

The best deals won’t always come from one single lender. At any given time, lenders anxious to place money will advertise aggressive specials, fill their pipeline with applications, pull out of the market and let someone else take the lead.

This isn’t much different from how it works today, except that Internet-focused lenders will get their fill a lot quicker than they do through current distribution models (because rate sites will give them more exposure).

But these changes will take time to set in. If you’re looking for the lowest advertised rates today, credit unions and online mortgage brokers are clearly the market leaders. Here’s a quick look at where the national market stands for well-qualified borrowers:

6-month Fixed:  There aren’t many 6-month specials out there unless you live in Manitoba where Cambrian, Carpathia and Crosstown Credit Unions feature 2.19% (an exceptional rate that’s equivalent to prime – 0.81%).

1-year Fixed:  Rates of 2.39% (or slightly less) are available through a handful of credit unions like First Calgary (Calgary, AB) and Assiniboine (Winnipeg and Northern Manitoba), and also through various brokers online.

2-year fixed:  Investors Group has the best widely available special at 2.35%.

3-year Fixed:  Scotiabank, Canadiana Financial and a slew of credit unions are at 2.79%, while at handful of online brokers are advertising 2.69%.

4-year Fixed:  Dozens of credit unions and brokers are at 2.89%. At the moment, this term has the least amount of price competition of any in the market.

mortgage-penalty-calculator5-year Fixed: While most brick and mortar institutions advertise 3.09% or more, the real market is at 2.99% or less. Numerous brokers are advertising 2.89%, but some of these rates are restricted and/or for “quick close” mortgages only.

10-year Fixed: 3.89% is the worst rate you can expect for a full-feature decade-long term. Online brokers are routinely advertising 3.79%-3.84%.

Variable:  Once again, Manitoba credit unions (Assiniboine, Crosstown, Caisse Financial Group and Steinbach) dominate the variable-rate market. They’re all at prime – 0.50%. In the rest of the country, most bank reps and brokers have access to prime – 0.35%, with a few brokers at prime – 0.40%.

HELOC:  Banks, credit unions and brokers are all huddled around prime + 0.50% (i.e., 3.50%). A few small and local credit unions, like iNova (Halifax, NS) advertise 3.25%.

Side Note: This survey only reviews rates. It says nothing about the quality of the mortgages themselves, your ability to qualify or the support you can expect with a given rate. Keep in mind, most deeply discounted rates come with little service or mortgage planning. If you want someone who takes time to carefully review your best alternatives and warn you of lender restrictions, it is rational to pay 5-10 basis points extra for that service (2.99% instead of 2.89% for example). That difference is chicken feed if you need advice, because bad mortgage selection will balloon your cost of borrowing after closing.

Rob McLister, CMT