There have been SO many questions around mortgage rates and deferred payements, along with alot of confusion so we asked our Mortgage Specialist Rylan Hahn to break it down for us...and as always he did a fantastic job!
The name of the game this week is mortgage deferrals and Bank of Canada rate drops and how they affect you.
Mortgage rates and the Bank of Canada changes
Fixed mortgage update:
- The 5 year benchmark bond (which fixed rates are based on) saw a bit of a steep recovery by the end of last week with a quarter point rise from 0.55 to 0.76%. There is currently a counter intuitive movement going on with many lenders having increased their fixed rates once or twice last week.
- This means that the banks’ cost of funds is very low but they have decided to add a “risk based pricing” margin to their mortgages which has increased mortgage rates above where they should be (and presumably increased their profits at the same time).
- Currently fixed rate pricing is in the mid to high 2% range.
- The opportunity with fixed rates is to consider restructuring your mortgage if we see another dip in rates to the low 2% range. Please feel free to contact me with any questions on this.
Variable mortgage update:
- The Bank of Canada has announced another 0.5% rate reduction today which should presumably lower the prime rate from 2.95% to 2.45% as long as the Banks decide to pass the savings onto Canadians.
- Prior to the recent changes the going rate for variable mortgages was prime -1.0% which would equate to a rate of 1.95%. Since the prime rate decreases the Banks have reduced this discount to a range of prime -.3 to prime which yields current rates in the mid to high 2% range.
- This means that the Bank of Canada reduced rates to stimulate the economy and the Banks decided to dramatically reduce their discount on variable mortgages (this increased variable rates) – effectively undoing much of the stimulus that the Bank of Canada was aiming toward.
Mortgage deferral information
- The vast majority of lenders in Canada have adopted a form of a deferral program for client mortgages.
- The majority of these programs involve deferring payments for up to 6 months and adding these payments to the end of the mortgage term.
- Most lenders will still be charging you interest during the deferral term.
- This is not a payment waiver, rather simply a payment delay. I think each client is the best judge of their situation but if you are able to comfortably pay your mortgage, it will be to your benefit in terms of long term mortgage reduction to continue to make your payments.
- I would caution you to be ready to explain to the lender why you need a mortgage deferral. Some lenders are very open to the deferral and others are trying to screen out people who are not high need so the best advice is to be prepared with a strong explanation in case it is needed.
Contact numbers for the most common lenders:
I thought it might be convenient for you for us to include the contact details for the most common lenders below. The lenders are extremely busy fielding calls from clients so anticipate waiting on the phone for decent amount of time before you get through.
- ATB 1-800-332-8383
- BMO 1-877-895-3278
- CIBC 1-800-465-2422
- CMLS 1-888-995-2657
- Equitable bank 1-888- 334-3313
- First National 1-888-488-0794
- Home Trust 1-855-270-3630
- Manulife 1-877-765-2265
- MCAP 1-800-265-2624
- Merix 1-877-637-4911
- RBC 1-866-809-5800
- Scotia 1-800-472-6842
- TD 1-866-222-3456
I would be happy to answer any questions that you have about deferrals along with renewing or refinancing your current mortgage.
Rylan Hahn, Roost Mortgage