—The Mortgage Report: Sept. 18—
Variable Discounts Improve Further
- Bankers are making more dinero on floating-rate loans. That’s motivating them to cough up some profit and sharpen their variable rate pencils. Online brokers are now effectively as low as prime – 0.93% on default-insured variables in some provinces. Uninsured customers (including those refinancing) get milked for more, as usual, but they’re still fetching as low as prime – 0.66 (1.79%).
- What’s driving the improvement? Well, for one thing, banker’s acceptance (BA) yields are at 10-year lows, as measured by 3-month CDOR. That’s widened the spread between prime rate and BAs to 194 basis points, or 17 bps above the 10-year average. (Think of that spread as a very rough proxy for lender profit on a floating-rate mortgage. The highest on record going back to 1992, was 219 bps, according to Bloomberg.)
- A widening of the prime – BA spread usually correlates with improving variable mortgage discounts and this time is no exception. We suspect we’ll see prime – 1.00% (1.45%) rates again as soon as October or November.
- TD Canada Trust trimmed two official variable rates today:
- The comfy green chair lender also dropped the following special fixed rates on Friday:
- 3yr: 2.19% to 2.14%
- 5yr (uninsured): 2.24% to 2.14%
- 5yr (high ratio): 2.07% to 1.97%
- That matches CIBC for the lowest widely advertised 5-year fixed rate in Canada.
- Meanwhile, Scotiabank is picking off its Big 6 peers with insured rates as low as 1.68%, albeit behind the curtains of its login-secured eHOME website.
The Agency Soon-to-Be-Formerly Known as CMHC
- …wants to dismantle its 41-year old brand and take the “mortgage” out of Canada Mortgage and Housing Corporation. Don’t mind the fact that 98% of its non-governmental funding/revenue last year was mortgage related. Its CEO is backing the name: “Housing Canada,” but the Twittersphere (link 2) is not exactly sold on the idea. (Parental discretion is advised on those links…it’s Twitter).