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Canada's Mortgage Interst Rates Lowest In 46 Years in Mississauga Ontario!:

by Jim Adair

It's been 46 years since Canadians could get a deal this good for a mortgage. But 46 years ago, there were few places to go if you wanted a mortgage. Most people went to their local banks, hat in hand, and took whatever terms were offered.

Now, Canada's largest banks are setting up subsidiary mortgage companies to help them compete with dozens of other financial institutions and mortgage brokers, and the winners are consumers.

Five-year mortgages are now available at less than five per cent, and there's a chance the rate could drop even more. This week the Bank of Canada decided to not to raise interest rates, responding to weak global economies and a slowdown in Canada's economic performance. Forecasts at the beginning of the year suggested that interest rates would rise slowly during 2003, as the Bank of Canada hiked rates to keep inflation in check. But a slower than expected U.S. economy, plus concern about the impact of SARS on the Toronto area, resulted in the rates remaining unchanged.

The housing market, although not as strong as last year, is still expected to post its second-best year ever for MLS sales, and rock-bottom interest rates can't hurt.

To earn the mortgage business, several financial institutions are trotting out new promotions and mortgage products.

For example, Scotiabank recently introduced a mortgage that provides home buyers with a down payment equal to five per cent of the property value. The mortgage is available for terms of five or seven years, with a rate discount of 0.50 per cent off the posted rate on ScotiaBank's seven-year term. It has a mortgage insurance premium of 3.9 per cent, which is 0.15 per cent higher than a standard 95 per cent high-ratio insured mortgage. The product is available until July 15, 2003, with a closing date before January 31, 2004.

Scotiabank also launched a mortgage with an interest rate and payment amount based on 0.5 per cent below the prime rate. Both the rate and the payment are fixed and may be reset every six months if Scotiabank's prime rate changes. It allows customers to take advantage of the low interest rate environment, and maintain a low rate and low payment for longer. If customers feel rates are rising, they can early renew at any time with an equivalent or longer term without penalty.

Alberta Cefis, executive vice-president, retail lending services at Scotiabank, says, "In the current context of a low interest rate environment, many Canadians want to be able to take advantage of lower rates as well as have the flexibility to lock into a fixed rate product should they feel rates are on the rise."

Both TD Canada Trust and the Royal Bank of Canada are taking a page from the automotive industry and offering "no haggle" mortgage deals. TD Canada Trust launched an advertising campaign promising that it will give customers its best rate mortgage, because it says Canadians don't like to haggle.

"We are working aggressively to increase our share of the Canadian mortgage marketplace," says Kathy Gregory, TD Canada Trust vice-president. "Our strategy is straightforward. Our customers tell us they have clear expectations of competitive rates offered through knowledgeable staff who can explain the right options for them. That's precisely what we're offering."

TD Canada Trust is also running a contest with a prize of $100,000 to be put toward a mortgage. Other financial institutions offer an assortment of flexible mortgage terms, cash-back options, and incentives to switch from other mortgage lenders.

Mortgage brokers have made big gains in residential mortgage market share in recent years, although last year they reported that market share had slipped a little as the financial institutions became more aggressive in their marketing. Mortgage brokers are working toward setting national standards for their industry, which they hope will give consumers more confidence in using their services.

In the meantime, more than ever, if you're looking for a mortgage, it pays to shop around.

First Published: June 2003

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