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Money It’s getting more confusing to shop for mortgages

18:41  10 may  2018
18:41  10 may  2018 Source:   moneysense.ca

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It ’ s getting more confusing these days for consumers to understand how to read the mortgage market and a big part of that is driven by competition. Your Mortgage : It ’ s Silly Not To Shop . How Many Mortgage Quotes Is Too Many ? The Federal Trade Commission suggests, “Different lenders

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It’s getting more confusing these days for consumers to understand how to read the mortgage market and a big part of that is driven by competition. A few weeks ago, TD Bank jacked up the rate on its five-year fixed mortgage by almost half a percentage point to 5.59 per cent. The other banks have followed suit in raising their rates pretty much across the board, but not to the same extent.

Then BMO came out this week with a teaser rate (available just to the end of the month) of just 2.45 per cent on its five-year variable rate, which adds up to a full percentage point off the bank’s prime rate.

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  Toronto-Dominion Lifts Mortgage Rate in `Biggest Move in Years' Toronto-Dominion Bank has lifted its posted rate for five-year fixed mortgages by 45 basis points to 5.59 percent as government bond yields touched their highest levels since 2011 this week. “It’s a big move, the biggest move in years,” said Rob McLister, founder of RateSpy.com, a mortgage comparison website. “There’s a lot of reasons why that could be -- maybe they’re taking a position on rates going forward, which is not that typical; maybe they’re trying to get people to lock in and generate better spreads.

It ’ s getting more confusing these days for consumers to understand how to read the mortgage market and a big part of that is driven by It ’ s because of all those factors that Thouin maintains that while BMO’s rate of 2.45 per cent is a good one, most Canadians should have been able to get that

Needless to say, it makes financial sense to shop around for the lowest rate for which you can It ’ s a good idea to get a copy of your credit report at least six months before you plan on obtaining a Before you shop , determine how much you want to borrow, which type of mortgage you want and

Do you grab the variable low rate knowing it’s going to head back up? That depends on where you think rates are headed next.

READ: Why did mortgage rates just surge?

Do you go for the fixed rate because you want to lock in and figure you can negotiate a discount to what the banks are posting? Depends on how much of discount you can find off of the posted five-year fixed rate. And if you think central banks will soon be chopping rates again, which will make variable rates the place to be.

And what about the new Mortgage Qualifying Rate? The MQR, introduced last year, is something mortgage holders never had to consider before last year’s move by regulators and the Bank of Canada to tighten lending requirements in order to cool the housing bubble. This new rate is taken off a calculation that takes all the big banks’ posted five-year rates and finds a middle ground. The banks are supposed to take that number, roughly an average of all the banks, then add 200 basis points (two percentage points) on top of it, then see if the mortgage shopper can handle payments at that higher rate. If the applicants can’t, then they don’t qualify for the mortgage.

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This Mortgage Shopping worksheet may also help you. Take it with you when you speak to each lender or broker and write down the information you Take the time to shop around and negotiate the best deal that you can. Whether you have credit problems or not, it ’ s a good idea to review your credit

At Confused .com we aim to help our customers save. Getting home contents insurance? Our calculator makes it easy for you to estimate the value of your possessions. If you've got a mortgage in mind and want to know how much you'll be paying back each month, try our mortgage calculator

READ: A look at some of the Toronto area homes that suffered huge price declines in 2017

The added layer of confusion for mortgage shoppers comes from the fact you can’t always guess where the MQR is going to land when the banks aren’t posting rates at the same levels and they keep changing them. But if you took your MQR based on TD’s posted rate of 5.59 per cent (meaning you’d have to be able to handle payments based on rates of 7.59 per cent), that is quite different from other banks who are posting their five-year fixed closer to 5 per cent.

One factor driving BMO’s promise of a full percentage point off the five-year variable rate is transparency, which the bank figures will help it compete with alternative lenders who aren’t bound by the same lending restrictions, experts say. In a sense the banks are playing the alternative lenders’ game, with attention grabbing short-term special rates, so consumers know they can easily get less than a higher posted rate.

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In today’ s financial industry it can get confusing shopping for a mortgage , that’ s where $LtG can make it simple. At $LtG, our clients come first, and honesty and integrity is something that all our agents live by. We have multiple lenders and we shop until we get you the best deal.

It ’ s more than a motto. At OJ Mortgage , it ’ s just the way we do business… one by one, family by family. In our fast paced, increasingly depersonalized society, people deserve competent, individualized attention. While the big banks focus primarily on larger customers, OJ Mortgage meets the needs of

“There’s a lot of competition out there now from alternative lenders who don’t have to meet the mortgage stress tests as well as by online brokers,” says Justin Thouin, CEO of lowestrates.ca. “BMO is seeing that unless they offer these lower rates, their mortgage business will suffer.”

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Mortgage expert Robert McLister of ratespy.com agrees, adding, “you’ve seen rising interest rates and mortgage rates, HSBC continuously undercutting the Big Banks, online and alternative lenders offering cheaper options as well as buyers who are smarter and negotiating harder. And we haven’t remotely seen how competitive it can get online.”

All this means just one thing. “The longer-term trend over the next few years is that mortgage markets will continue to get more competitive.”

It’s because of all those factors that Thouin maintains that while BMO’s rate of 2.45 per cent is a good one, most Canadians should have been able to get that all along. “Canadians have to realize that the mortgage rates the banks are offering aren’t what they should settle for,” says Thouin. “Right now, there are a lot of alternative lenders offering rates less than 2.45% five-year variable rate now.”

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For most of us, it ’ s a case of going out and looking at lots of different properties before finding the right home. It pays to be just as careful when choosing a home loan. You can get a mortgage directly from a bank or through a mortgage broker. Both have their advantages and disadvantages.

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For instance, Sigma Mortgage is offering a 2.16 per cent variable closed (five-year term) while True North Mortgage is offering 2.21 per cent. And consumers are wising up. Ratespy.com’s McLister adds that four out of 10 mortgage seekers consult online lenders now but predicts that in five years it will be closer to 8 or 9 out of 10.

“While the banks will try to maintain their margins, they will have to negotiate,” says McLister. And because the mortgage rates banks advertise often isn’t the actual rate available (you can often get lower rates if you go in and negotiate with them) this makes BMO’s move to post the rock-bottom discount rate of 2.45% right on their website even more significant in that it gives consumers a better idea of what they can ask for.

“Hats off to BMO for posting it right on their site,” says McLister. “Kudos to them.” The game is on.

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