If you look at RateSpy’s lowest rates for the Big 6 banks you’ll generally notice three things:
1) They refer to “discretionary rates” at the banks
2) They are estimates
3) They are usually the same for all six banks.
Though it doesn’t seem obvious, there is method in this approach. The explanation starts with the mortgage pricing strategy used by major banks.
Unlike lenders and brokers that are often more transparent, the Big 6 banks hold their rate cards close to the vest. In general, they do not widely advertise their lowest rates. If they did, they’d earn far less profit. It is better (for the banks) if you don’t know how low they’re willing to go. That way, you don’t know when you’re leaving money on the table.
To help consumers combat this information asymmetry, the Spy estimates the discount that a well-qualified borrower can expect at the major banks. We do that by surveying bank mortgage specialists, analyzing funding costs, assessing the banks’ public-facing pricing moves and monitoring competing rates throughout the market.
Since major banks typically price match for strong clients, we estimate one discretionary rate per term for all banks. The thinking is, a borrower who meets all of a bank’s guidelines should be able to get this rate (or close) from any of that bank’s peers, using basic negotiation.
Can everyone expect these rates? Certainly not. At any given time the bank, branch or mortgage salesperson you’re working with may decide not to be competitive. In that case, simply take your business to another lender or broker. The point is, all banks can offer these rates if they want to. Sometimes you may even be quoted a lower rate than what you see on the Spy.
Keep in mind, you need to be sufficiently qualified to get discretionary discounts. Among other things, you may need:
- The property to be your primary residence
- Stable provable income
- A 25-year amortization or less
- Good credit with no recent delinquencies, including a credit score of at least 700 (average is about 750)
- Reasonable debt ratios (as measured by your monthly obligations divided by monthly gross income).
It also helps to have a positive net worth and do other business at that bank, but this latter point is less of a factor than it once was.
Last but not least, keep in mind that RateSpy’s discretionary rate estimates do not apply to all mortgages. For example, you won’t typically get these rates on non-prime mortgages, non-marketable properties, investment property mortgages, construction mortgages, new immigrant financing, cottage mortgages and other unique situations.