—The Mortgage Report: Aug 21—
Boldly Going Where No 5-Year Fixed Rate Has Gone Before
- For the first time, pricing on Canada’s most in-demand term is now effectively as low as 1.59%. That’s for default-insured 5-year fixed mortgages in Ontario. Consider that just 18 months ago rates were double what we see today.
- On the uninsured side, we’re getting multiple big-bank reports of 1.95% or less for super-prime customers. Although 1.99% and 2.04% are more common. Here are conservative estimates of the latest big bank discretionary mortgage rates.
- Interestingly, the gap between fixed and variable remains ultra-tight at less than 10 basis points in most cases. But now, for the first time in months, we’re seeing a noticeable uptick in variable-rate applications. That’s explained by what follows.
Variable Discounts Return with a Vengeance
- Well, that was fast. As many recall, banks erased discounts from prime rate on floating-rate mortgages this spring. Now, the lowest insured rates are back to prime – 0.92%, a stunningly fast turnaround for a recession. We have the Bank of Canada, CMHC and Department of Finance to thank for that, as their pandemic liquidity support measures brought funding costs back down lickety-split.
- For all refinancers, competitive uninsured mortgages are still stuck in the prime – 0.60% range. Although you might be able to squeeze a bank for a little better if your mortgage is big enough.
Record Low Non-Prime Rates
- Deals on non-prime mortgages are the best they’ve ever been, according to RateSpy’s records. If your debt ratios are a bit stretched, your credit is below average or you’re having trouble proving income in the normal way, you can now find non-promotional 1- and 2-year fixed rates under 3% for the first time, thanks to Equitable Bank’s new 2.99% offer.
- “This rate has never occurred before with an institutional lender,” says prominent broker Ron Butler of Butler Mortgage. “The Product / Pricing SVP at [a competing lender] emailed me this morning [saying], ‘Ron, is this 2.99% thing frigging true??'”
- As with most non-prime rates, a lender fee (1%) applies in this case.
Higher Delinquencies Next Year
- “We believe recent extensions and amendments of government programs (combined with deferrals and a slightly better-than-expected economic recovery) will…likely [push] the peak of [mortgage] impairments into mid-2021,” says RBC Capital Markets analyst Darko Mihelic (via BNN Bloomberg).