CBC News just released an article stating Canadian homebuyers are being offered some of the lowest mortgage rates seen in years as lenders battle for borrowers business. Rates on a standard five-year fixed-rate mortgage have fallen to their lowest level in two years, according to rate comparison website, Ratehub.ca.
“Borrowers just about everywhere across the country can take their pick of offerings well below 3% at the moment”, says James Laird, the site’s co-founder and president of mortgage brokerage, CanWise Financial.
At the moment, Laird says he’s seeing five-year fixed rates as low as 2.64% for certain buyers, and even higher-risk borrowers can easily find a loan for 2.89%. That’s the lowest range since the summer of 2017.
We're seeing five-year fixed rates as low as 2.64% for certain buyers, and even higher-risk borrowers can easily find a loan for 2.89%. That's the lowest range since the summer of 2017.
Unlike variable rate loans which take their cues from the Bank of Canada’s benchmark rate, lenders finance fixed-rate loans based on the rates they can get in the bond market. Essentially, they’ll borrow money themselves at one rate, loan it out to a borrower at a higher rate and make money on that spread.
So current rock-bottom interest rates on fixed loans are no coincidence, considering the yield on a five-year Government of Canada bond dipped below 1.3% this month. If a lender can borrow funds for as little as 1.3% then turn around and make money by loaning it out for twice that rate, they have every incentive to keep offering those deals.
“The hard cost of funding these loans is going down,” Laird said. “And at the same time we are at the tail end of the most competitive market, when lenders fight for [business], so that’s when they are willing to thin out their margins a bit to attract volume.”
Most borrowers prefer the peace of mind of fixed rate loans, but lenders can tempt borrowers to variable rate loans with even better rates — even if they’re only temporary.
Laird says typically it takes a spread of about a full percentage point to entice most people to make the leap. Which is why those loans are even less popular than usual because that premium has almost completely vanished.
He says the best variable rate loans are about 2.65% at the moment, which is barely better than the fixed rate, for a lot more risk.
The best variable rate loans are about 2.65% at the moment, which is barely better than the fixed rate, for a lot more risk.
If you have any questions in regards to mortgage rates, securing a lender, our current condo projects or would simply like to learn more about our company, book a time to meet with us at our newly renovated showroom. While you’re here we can give you a sneak peek of our newest project, Wellington West Lofts.
If you’d like to read the original article by CBC News in its entirety please click the following link. ‘Pretty cheap money’: Canadian mortgage rates falling to their lowest level in 2 years
