Mortgage, Money and Dream – Our thoughts on Canadian Mortgage Market
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Bond yield touched the bottom few days ago. In a reaction to that event – fixed rates were reduced by some lenders. Lately we do not see much movements in variable rate side. That front is very quiet.

Currently we are all about fixed rate mortgages. Since last quarter of 2012 – variable rate discounts have altogether disappeared from the market. If a borrower is doing a hard-core bargain shopping on rate then he/she may find some lenders offering a reduction but not by much. One of my clients few days ago told me that he realised after a lengthy shopping process he saved $5.00 a month on a three years mortgage and spent about two weeks to get that.

Variable Rate Mortgage Discount

Recently a number of studies published by lenders and CAAMP showed that variable rate popularity has lost traction. More borrowers are selecting fixed over variable rate mortgage.

This practice is not very unusual. When a borrower shops for rate then it is the single most important part of that shopping process. If a fixed rate mortgage offers lower rate than variable rate then so be it. We tend to select the lower rate naturally and most likely logically.

There is a lesser known part in this story. Variable rate discount is still available and it is offered not on five years but on three years closed rate. That is not a bad option as the shorter term offers a lower exposure to future rate hike risks.

Industrial Alliance has been offering about 20 basis points discount for last few months on a three years closed variable rate mortgage and since last week the discount stood at 0.4%.

Generally these rates are very restrictive and the underwriting guidelines are also strict. Some borrowers still likes this rate and we can hope that these types of discounts will be offered on longer terms as well.

Save my back blah blah:

Rates are there does not mean you would get them. They can change anytime, such as some fixed rates are going up from Monday. Please talk to a mortgage broker to find out more. Please don’t forget to see the disclaimer.