financial market fears coronavirus

Latest in Mortgage News: Fixed Mortgage Rates Could Fall Over Coronavirus Fears

As fear grows over the deadly Wuhan coronavirus that has killed more than 100 people, it is now becoming the world’s⁠—and Canada’s⁠—latest economic headwind.

That fear spread to financial markets on Monday, with the TSX falling 142 points and New York’s Dow Jones ending the day down more than 450 points. Canada’s 5-year bond yield fell sharply to a three-month low, signalling that mortgage rates are likely headed lower as well.

“…the new coronavirus is going to put fixed mortgage rates on sale,” founder Rob McLister wrote in the Globe and Mail. He pointed to the economic impacts contagions can have, such as the 2003 SARS epidemic, which dragged Canada’s GDP down by a tenth of a percentage.

“The present contagion creates yet another risk for Canada’s economy,” he wrote, adding it follows a sombre Bank of Canada rate announcement last week in which the Bank indicated it will be “watching closely to see if the recent slowdown in growth is more persistent than forecast.”

“The impact of the Wuhan coronavirus on mortgage rates could potentially last until reports of new cases slow significantly,” McLister added.

Any further fall in fixed mortgage rates would follow a downward trend over the course of 2019. They fell to near two-year lows in the fall, lower than most variable rates.

The best widely available, full-featured 5-year fixed mortgage is currently 2.79%, which McLister said could “easily fall closer to 2.50% next month” if bonds continue to move lower.

Mortgage Shoppers Prefer Human Advice…Unless the Price is Right

Mortgage brokers who have been fearing the era of digital mortgages can breathe a sigh of relief. It seems most homebuyers prefer personalized advice…from a human.

Personal mortgage advice from a mortgage brokerThat’s according to a recent survey from RATESDOTCA on mortgage shopping behaviour. But that doesn’t mean brokers can afford to be complacent.

A majority of mortgage shoppers also said they would be willing to trade in that personalized advice for a digital-only mortgage if it meant they could get a lower rate. Almost half of mortgage shoppers said those savings would have to be at least 0.05 to 0.20 percentage points to get them to use an online-only lender. One in five (18%) said they wouldn’t need a rate-saving incentive to use an online-only mortgage lender.

On the other hand, a full third (34%) of mortgage shoppers rely solely on offline sources when researching mortgages.

Here’s the current breakdown of where shoppers are getting their mortgage information:

  • 45% – in-person advice from a bank, lender or broker
  • 42% – bank/lender websites
  • 27% – friends and family
  • 20% – rate comparison websites

There was another takeaway for lenders: fewer than a quarter of rate shoppers consider brand names when shopping for a mortgage. Instead, their top considerations are getting the lowest interest rate (47%), keeping the total cost of borrowing as low as possible (19%) and clear communication of the conditions and features of their mortgage (14%).

Scotiabank graph on HELOC borrowingHELOC Borrowing Falls for First Time in Four Years

The amount of borrowing via Home Equity Lines of Credit (HELOCs) from chartered banks fell by 0.4% in November, marking the first monthly contraction since October 2015, according to Scotia Economics. That caused the annual growth rate of HELOC borrowing to continue its downward trend, now in its eleventh consecutive month.

Scotia notes that ever since HELOC borrowing growth started to slow during the market turbulence of 2018, it “has not recovered despite the stabilization of several major urban real-estate markets.”