Big Banks Kick Off Spring Mortgage Season with Low Rates, But You Can Still Do Better with a Private Mortgage Broker

The battle of the bank rates is starting to heat up with the start of the spring mortgage season—one that is expected to be particularly heated. By getting a head start and lowering rates on five-year fixed mortgages, Canada’s big banks are hoping to attract first-time home buyers, especially in Canada’s hottest real estate markets, where there is a scarcity in supply. However, first-time home buyers looking for great rates and flexibility can do better with a private mortgage broker.

Rates at All-Time Lows

The Bank of Montreal (BMO) and TD Canada Trust have both cut their five-year fixed mortgages (the industry’s most popular phrase) to 2.79%. While the rates from the big banks are certainly lower than what they were this past winter, they come with certain restrictions.

With Canada’s big banks, there’s always a catch. For example, the 2.79% rate from BMO will only let home buyers prepay up to 10% of their mortgage in a lump sum payment each year, compared to the industry norm of 20%. On top of that, consumers that lock in that term cannot refinance their mortgage and have to stay with BMO for the duration of the mortgage. If you sell your home during that five-year term, you have to transfer the mortgage to your next one.

The Canadian Imperial Bank of Commerce is also trying to attract first-time home buyers with seemingly attractive rates; the CIBC even posted a four-year fixed mortgage at 1.99%! But read the fine print: that rate is only in place for the first nine months. After all, it’s at 2.83% for a total blended rate of 2.69% over four years. Of particular note, to get that 1.99% teaser rate, first-time home buyers need to qualify on the higher five-year rate.

There are much better mortgage products out there for first-time home buyers with more flexible options. Unfortunately, you won’t hear about them from Canada’s big banks. That’s because they only pitch their own financial products, whether it is in your best interests or not.

Housing Prices Moderating in Most of Canada

The fact of the matter is that first-time home buyers need to find a mortgage best suited to their financial and lifestyle needs. What they don’t need is to take whatever the big banks tell them they need. Over the life of your mortgage, every little bit helps save you more.

This is important to keep in mind, especially when you consider that, for the first half of March, the average detached home in Toronto was selling for almost $1.1 million; that’s up 21.3% over the same time last year. For the Greater Toronto Area, the average selling price for the same two-week period is up 10.6% year-over-year at $620,106.

It’s the same story for Vancouver, where the benchmark price for a detached home in February increased 7.9% year-over-year to $1.02 million. The price for a detached unit increased 4.6% year-over-year to $481,500.

Housing prices are not as heated in most of Canada, though. In fact, housing prices fell in eight of 11 major housing markets in February. Calgary prices are down for the fourth month in a row for a cumulative decline of 2.3%; in Winnipeg, it was the fourth decline in five months, for a cumulative decline of three percent; and housing prices are down even more east of Toronto.

Canadalend.com: Getting Home Buyers the Best Rates and Products

More and more first-time Canadian home buyers are discovering the many benefits of using a private mortgage broker like Candalend.com . Among first-time buyers using a broker, 50% said they obtained a mortgage with a lender other than the financial institution they deal with the most; this compares to only 27% among first-time buyers dealing directly with their mortgage lender. What this means is that first-time buyers using a broker are 85% more likely to switch financial institutions when getting a mortgage.

With the spring real estate market getting started, now is the perfect time to contact the licensed, independent agents at Canadalend.com. Because Canadalend.com agents are independent, they have access to hundreds of different lenders.

Whether it’s a fixed or variable mortgage, Canadalend.com can help you find the best rates with the kind of flexible terms that meet your financial and day-to-day needs. To see what kind of mortgage you qualify for, contact Canadalend.com today to set up a free consultation or apply online and one of our private mortgage specialists will help you set up an appointment at your earliest convenience.

Sources:

“BMO Smart Fixed Mortgage,” Bank of Montreal web site; http://www.bmo.com/main/personal/mortgages/smartfixedmortgage?ecid=ps-AGILE17088MTG4-SNBMO20&BMO_VSC_ADC=Google%5EMortgage-Acquisition%7CBMO%20Mortgage%20Banking%5EBank%20of%20Montreal%20bank%20mortgage%20rates%20Broad, last accessed March 31, 2015.

“Fixed-Rate Closed Mortgage,” CIBC web site; https://www.cibc.com/ca/mortgages/fixed-rate-closed-mortg.html?WT.mc_id=ExtPAID_campB-E-Mortgage_Types_kwd+CIBC_+mortgage_fixed_adgrpfixed_mortage_rates-E, last accessed March 31. 2015.

“GTA Realtors® Release Mid-Month Resale Housing Figures,” Marketwired web site, March 17, 2015; http://www.marketwired.com/press-release/gta-realtorsr-release-mid-month-resale-housing-figures-2001075.htm.

“Home buyer and seller activity outpaces historical averages in February,” Real Estate Board of Greater Vancouver web site, March 3, 2015; http://www.rebgv.org/news-statistics/home-buyer-and-seller-activity-outpaces-historical-averages-february.

“Teranet – National Bank National Composite House Price Index ™,” House Price Index web site; http://www.housepriceindex.ca/, last accessed March 31, 2015.

“2014 First-Time Homebuyers Survey,” Canada Mortgage and Housing Corporation web site; http://www.cmhc-schl.gc.ca/en/hoficlincl/moloin/sure/fihosu/upload/FTB-InfoBrochure_WEB_EN_Oct15.pdf, last accessed March 31, 2015.