Investor’s Group (IG) has just launched a 1.99% three-year variable. That’s the lowest rate in Canada. In fact, it’s 25 basis points below the next closest competitor.
Peter Veselinovich, Vice-President, Banking & Mortgage Operations, says that IG “could have priced it at prime – 0.80%…” but fewer would have noticed. He says IG has a big block of funds that it needs to lend out at this rate, and there’s no set expiry.
“It could last for three weeks or three months,” Veselinovich adds.
Many are wondering how IG can offer this rate when others can’t. One capital markets expert we spoke with says, “I have no idea how [Investors Group is] funding this. It could be from internal deposits. There are no economics to justify that pricing.” Veselinovich confirms that it is self-funded and not a bank mortgage repackaged under IG’s name.
Compared to today’s average discounted variable at prime — 0.65% — this deal offers $2070 of interest savings over 3 years on a $200,000 mortgage with a 25-year amortization.
This is a rate that will make even hard-core fixed-rate advocates think twice before locking in. Prime rate would have to jump about 1.75 percentage points (e.g., +1.00 in late 2015 and +0.75 in early 2017) for a 5-year fixed at 2.99% to beat this deal.
By “beat,” however, we’re referring to the basic interest cost. As we all know, there’s more to borrowing costs than the up-front rate.
Read the details:
- Prepayment Options: 15% lump-sum annually, 15% annual payment increase and double-up payments
- Lock-in Option: Lock into a fixed rate at advertised rates any time
- Refinances: Not allowed before maturity
- Early Renewals: Not allowed
- Early breakage: Not allowed unless due to a bona fide sale of the property
- Payments: Either fixed based on the 3-year posted rate (currently 3.75%) or adjustable based on IG’s 1-month fixed rate
- Registration: Collateral charge (meaning, the chances are high you’ll have to refinance and pay legal fees to switch to a new lender. On the other hand, this lets you increase your mortgage amount without legal fees.)
- Other Restrictions: Not available with an automatically readvanceable mortgage
This promo is available only through an IG Mortgage Planning Specialist.