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Which Canadian bank offers the lowest mortgage rate?

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Which Canadian bank offers the lowest mortgage rate?

The answer, “it depends,” is not of much help here but it is accurate as the bank that offers the lowest rate changes all the time. To complicate matters, the mortgage rates shown on the banks’ websites are not necessarily the lowest ones that they offer and it is difficult to figure out what the lowest rates actually are.

Here are a few pieces of advice that will help you search out the lowest mortgage rates around.

Competition

At the moment (November 2019), HSBC is trying to grab market share and customers from the other banks. The HSBC mortgage rate is lower than the advertised rate of the other major banks. Keep a look out for other under-cutting of competitors’ rates that may go on from time to time.

Negotiation

You are in a good position to negotiate with the banks for their lowest mortgage rate if you have a regular income and a very good credit score. The first step is to find out what the lowest rate is and your experienced real estate agent will help you with that. Another way is to ask friends, family and anyone else you know if they know someone who works for the bank and gets the employee mortgage rate – that will be the lowest rate too. With this valuable information in hand, it is time to go to the bank and negotiate with them for that rate.

Widen your search

You are not limited to banks in your search for the lowest mortgage rate – consider credit unions and other lenders as well. As at Nov. 20, 2019, HSBC had the lowest published bank rate of 2.49 per cent (high ratio) for a five-year fixed-rate mortgage. However, brokerages that do buy downs (decreasing the rate by lowering commissions) beat this number: Mortgauge-Wowa advertised a rate of 2.41 per cent. On a $500,000 mortgage, this could save you $2,000 in five-year period.

Down payment

For the best interest rate, your down payment should be less than 20 per cent (high ratio mortgage) or greater than 35 per cent of the selling price. If you put down less than 20 per cent, in Canada you should take out CMHC-insurance so that there is almost no risk for the lender but it would cost you 2.8 to four per cent of the entire mortgage amount and unlike US mortgage insurances could not be cancelled later. Conversely, if you put down more than 35 per cent of the selling price, there is also little risk to the lender if the borrower defaults since this means in the default case, if the property being sold by the lender in the price that is not lower than 70 per cent of the original price, there would be almost no loss for the lender. In both cases, with little risk to the lender they can give you lower rates without jeopardy to themselves.

Terms and conditions

With whatever mortgage you get – lowest rate or not – you should check all the terms and conditions associated with it. Consider especially the termination penalty, the dollar amount that you have to pay if you pay your mortgage off early or if you sell your home within the mortgage term. This may be significant enough for you to consider not taking that particular mortgage.

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Homebuyers undeterred by changes in mortgage landscape

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Homebuyers undeterred by changes in mortgage landscape

Mortgage web

Though 2018 was not the best year for the mortgage landscape, Canadians remain hopeful about buying a home.

A new survey from mortgage rate comparison site Ratehub.ca survey found that, despite recent regulatory changes and interest rate hikes,71 per cent of current non-owners plan to buy a home in the future. And 59 per cent of prospective first-time homebuyers plan to purchase a home within the next two years.

This year saw a number of changes that affected the costs of ownership. In January, the mortgage stress test came into effect, which lowered affordability for Canadians with conventional mortgages by around 20 per cent, Ratehub.ca says. In addition, through 2018, the Bank of Canada announced three 25-basis-point interest rate hikes. (These increases are almost always immediately followed by mortgage rate hikes at Canada’s major banks.) Meanwhile, home prices in large cities continued to edge upwards.

Young Canadians most optimistic

Ratehub.ca, however, says younger Canadians remain the most optimistic about the prospect of homeownership, with Millennial and Generation Z Canadians leading the charge in homebuying intent. According to the survey, homeownership is a goal for:

  • 87 per cent of Generation Zers
  • 81 per cent of Millennials
  • 64 per cent of Generation Xers
  • 54 per cent of Baby Boomers

Canadians’ high intent to purchase is tempered by several possible homeownership hurdles. When first-time buyers were asked about their primary barrier to entering the housing market:

  • 44 per cent cited insufficient down payment funds
  • 17 per cent cited housing market uncertainty
  • 12 per cent said their household income was too low to enter the housing market
  • 9 per cent preferred to maintain housing flexibility
  • 6 per cent said their credit score was too low to qualify for a mortgage

Many Canadians also expect home prices and mortgage rates to continue their upward trend in 2019. Among Canadians who plan on entering the housing market in 2019, 68 per cent believe mortgage rates will increase next year, while 58 per cent believe home prices will rise.

Better understanding needed

An eagerness to enter the housing market, however, hasn’t resulted in a better understanding of mortgage regulations amongst first-time homebuyers, Ratehub.ca says. Forty-seven per centof prospective first-time homebuyers are unaware of mortgage qualification rules that came into effect in 2018.

“The biggest hurdle for first-time homebuyers is saving up for a down payment,” says James Laird, co-founder of Ratehub Inc. and president of CanWise Financial. “While first-time buyers can take advantage of programs like the RRSP Home Buyers’ Plan which are tailored for their needs, buyers can also benefit from building a realistic savings plan to hit their goals.”

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