You know the situation is bad when Canadians need to be told by a bank to shop around for mortgage rates.
While we at the Spy beat that drum daily, banks are normally happy to sell you mediocre “special offer” rates, or even posted rates (for renewers who are gullible enough).
That’s why it’s eye-catching to see Larry Tomei, Executive Vice President and Head of Retail Banking and Wealth Management, HSBC Bank Canada, giving this advice: “Whether you’re considering locking in your rate or…a variable rate…(it’s important to) shop around for the best possible rate.”
Of course, the reason HSBC encourages people to shop around is because HSBC has some of the best rates in Canada. (See HSBC mortgage rates.) It knows you’re going to find those rates if you spend any time Googling mortgage options.
How Canadian Mortgage Consumers Compare
Tomei’s advice was part of an HSBC survey that found Canadians are the least likely–among 10 different countries–to compare mortgage rates.
Just 50% of Canadians said they’ve shopped around to find the lowest mortgage rate. Compare that to 79% in France, 69% in China and 61% globally.
It makes you wonder why more mortgagors don’t try to slash their interest costs. For a well-qualified borrower, finding rate bargains in 2018 is as easy as typing “best mortgage rates” in a search engine, comparing rates on a rate site and calling a few brokers or lenders. Investing one hour in rate research could save 0.20%-points or more (i.e., $1,600 to $1,800 of interest on the average $200,000 five-year mortgage).
Exposure to Rate Shock
The survey also revealed that Canadian homebuyers are either superbly prepared or overly optimistic. Just 1 in 5 (20%) of current homeowners said they’d struggle with a two-percentage-point rate increase.
That’s the lowest percentage among 10 countries in the survey. The global average is 32%.
Quick Tip: If you want to see what your payment would look like at renewal—after a two- or three-percentage-point rate jump—try out this mortgage stress test calculator.
A much larger percentage of homeowners (48%) admit they’d face a challenge with a five-percentage-point increase. But this discounts the true impact. With that kind of rate spike, payments could jump upwards of 40%, a punishing blow to most families.
More Behavioural Insights
The survey also unearthed some other interesting stats:
- Just 39% of today’s mortgage holders have switched mortgage providers in the past.
- 50% of mortgage holders (and 57% of millennial mortgage holders) have compared other lenders to see if switching was worth it.
- 78% of current and prospective homeowners have never experienced a rate increase with their current mortgage.