http://www.cbc.ca/news/business/variable-mortgage-rates-1.4666867

Banks cutting variable rate mortgages even as fixed ones head higher

Gap between variable and fixed rates at big banks now at highest level since 2011

Pete Evans · CBC News · Posted: May 17, 2018 10:49 AM ET

  476 Comments 

Commenting is now closed for this story.

 

Kevin Lacroix

You can bet your last dollar that some actuarial in the banks has decided that getting people hooked into a variable rate mortgage (when rates are climbing) will benefit the bank over the next five years. Beware.

David Amos

@Kevin Lacroix Methinks you took the wind out my sails I was gonna post a comment stating "Buyer Beware" as I read the article but it appears you were way ahead of me So at the very least I should agree and tip my hat to you N'esy Pas?

 
Hugh MacDonald

Q: Why don't the suits bankers wear have pockets?
A: Whoever heard of a banker putting his hands in his own pockets.

David Amos

@Hugh MacDonald Methinks many folks have noticed banksters lugging brown paper bags for political dudes and their pals That amount of cash is too much for pockets anyway N'esy Pas?

Jane Beagle 

As a two time successful mortage finisher, there is a strong case for variable rate mortgages. I used them throughout the early 2000s and 2010s. Bank of Canada was still lowering it's lending rate and I was able to save a lot in interest payments (at one point paying 1.35% and 1.75%). 25 year terms were paid out in ~15 years.

If I were getting into a first time mortgage I would still consider a variable. If you can get 1.0% or greater below prime, that is still 4 BOC rate raises, and you can attack the principal in the meantime. That said, with trudeau's flawed economic nightmare there is no guarantee that those 4 BOC rate raises won't come quickly.
Good luck.

David Amos

@Jane Beagle "That said, with trudeau's flawed economic nightmare there is no guarantee that those 4 BOC rate raises won't come quickly."

Methinks you forgot all the sub prime mortgages that caused the crash of 2008 N'esy Pas?

Jane Beagle

@David Amos
Oh most definitely I did not forget. But that was in the U.S. not here. It had nothing to do with Harper or Trudeau. In fact Harper's lending measures at the time helped prevent it here. Fact.

David Amos
 @Jane Beagle Methinks you forgot that Harper ignored warnngs when he was the boss and he bailed out our banksters in 2008 N'esy Pas?

https://www.butlermortgage.ca/news-details/harper--s-advisers-dismissed-warning-about-low-interest-rates-add-to/

Posted on 09-04-2013 04:09
Summary: The Prime Minister’s advisers have dismissed a warning by a respected think tank that ultra-low interest rates need to start rising now to avoid damage to the Canadian economy.

http://www.cbc.ca/news/business/banks-got-114b-from-governments-during-recession-1.1145997

Banks got $114B from governments during recession
Support for banks 'more substantial than Canadians were led to believe': CCPA report
CBC News · Posted: Apr 30, 2012 9:55 AM E

 

Pam Sutton

Banks: “Helping people to get into debt for hundreds of years”

David Amos

@Bob Foley "who uses there real name lol"

I do

 

Andrew Farmer

Sounds like putting a big fat worm on a very sharp hook.

David Amos

@Andrew Farmer YUP

 

Peter Parker

(hand raised) - Mortgage paid-off, even in super-expensive Vancouver.
Live within your means people.

Derek Golota

@Peter Parker ...don't worry, current government ( municipal and provincial ) will tax you on what you have paid off .....just ask folks in Kits. House rich, cash poor "millionaires" are not happy, some will be "forced " out of their homes just like folks in Whistler after 2010 Olympics.

David Amos

@Derek Golota "House rich, cash poor "millionaires"

Good point

Alexandre Hilton 

@Derek Golota Such a crock. If you could consistently make the returns you claim, someone from the bank would contact you and offer you a job in some hedge fund management team.

I know you are going to defend yourself until you are blue in the face, but you are exaggerating, and it's plain as day to anyone who actually follows the market. You may have hit one or two gems that actually returned that, but a very tiny portion of investors 'generates 15%+ a year' like you claim.

Even without reading your entire posts (which I just did now, and confirmed my suspicion) I knew you were just a green investor who put a couple bucks in the marijuana market, and somehow think you are some kind of golden goose. It is laughable to those of us who actually work in finance. You are giving terrible advice to people who might actually be trying to get their finances in order, and you should be ashamed.

Page is closed to commenting.
David Amos
@Alexandre Hilton :It is laughable to those of us who actually work in finance."

Methinks that a true nihilist would not bother to read CBC let alone offer an opinion as a investment dude N'esy Pas?  

  

John Brown

Hey, they're just trying to help folks out. Oh sure, fixed rates are jacked, but this 'variable rate' they speak of must be a great deal or they wouldn't offer it, customer oriented as they are.

I mean, c'mon, if you can't trust the bank guys, who can you trust.

Content disabled.

David Amos

@John Brown Methinks thou doth joke too much because most folks don't know about the schooner nicknamed "The Black Joke" N'esy Pas?

https://www.thestar.com/news/insight/2012/09/28/joseph_barss_the_greatest_of_the_nova_scotia_privateers.html

Joseph Barss: The greatest of the Nova Scotia privateers

David Amos

@John Brown Methinks that CBC does not appreciate the true history of banksters in Nova Scotia N'esy Pas?

 
Brock Samson

Whenever the banks are telling people to buy that usually means the banks are positioned to make a lot of money... from you.

Scott Shari

@Brock Samson WHAT.??? Soooo, UR sayink the BANKS are trying to make money.... WHODA thunk it.????

David Amos

@Scott Shari Methinks Mr Samson is correct N'esy Pas?

 

Martin Howser

“Hey kids, buy an overpriced property today with our low rates”

.. ignore that those rates will be rising at least 3 times this year alone...

Bryan Atkinson

@Martin Howser

Not everywhere is overpriced like TOR & VAN. 11 years ago I bought a condo with a 20% down payment. My mortgage is now down to $200. a month. And the banks are tripping over themselves trying to get me to borrow money because of the equity I have in my property.

That could never have happened if I'd continued to rent instead of buying.

David Amos

@Bryan Atkinson "That could never have happened if I'd continued to rent instead of buying."

Oh So True

Peter MacDonald

The banks are not pushing variable rate mortgages to "drum up business." They are pushing variable rate mortgages because they know rates are rising, so they will make more money from the uninformed.

David Amos

@Peter MacDonald I agree


 
Brian Robertson

There is a lot more of this to come.
Interest rates have been suppressed for years by governments in order to stimulate a lagging economy.
With record growth south of the border, such policies are no longer required there. And because of their influence on our economy, rates here will need to follow accordingly.

This is bad news for big spending Liberal governments, as it tightens their purse strings.
Now they will be forced to start dealing with debt and deficit.

David Amos

@Brian Robertson "The Canadian Dollar will tank if our rates are not competitive."

Methinks Trudeau The Elder was correct when he explained we are like a mouse in bed with an elephant We are not competitive. We merely follow the Yankees' every move N'esy Pas?

 
Joe Gall

Suck 'em in, lock 'em in.

David Amos

@Joe Gall YUP

 

Jim McAlpine

So it would seem the government does everything to hold Canadians accountable for bad policy (stress test for mortgage, etc.) yet do nothing when the bankers continue to promote an unstable financial tool. Anyone who gets into a variable rate today with no knowledge of how much or often that rate will rise is asking for trouble.

David Amos

@Jim McAlpine YUP

 
Brian Bird
The banks, as usual, are playing games that can only hurt prospective house buyers, either at the time of purchase, or on renewal of their mortgages. I take exception to the manner in which these banks follow in any announcements. T-D starts, followed very shortly by the Royal, CIBC, BNS, and BofM. This type of price fixing is supposed to be illegal under Anti Combines legislation, but the banks, and oil companies do it routinely. I know from personal experience that the oil companies do it. Having worked for one for several years in a position of knowledge about pricing, I often heard from the Manager of the local sales office about conversations between him and his ilk from competitive companies. We have to do something to prevent pricing from being agreed to by all banks, oil companies, and any other industries that engage in price fixing

David Amos

@Brian Bird "We have to do something to prevent pricing from being agreed to by all banks, oil companies, and any other industries that engage in price fixing"

Methinks what you called "Anti Combines legislation" should be enforced by the governments we elected N'esy Pas?

 
Will McComb

Some would call it Bait & Switch

Bruce Strongarm

@Will McComb

What?

Bait and switch is when you offer one deal, then once you get the customer in the store it is no longer available and you sell them something else.

This is nothing like bait and switch.

David Amos

@Bruce Strongarm Methinks they will get ya by hook or crook N'esy Pas?

Jack Richards

A debt fueled economy does not work. People need to save more to buy stuff.

David Amos

@Jack Richards Yes Sir I agree and they need to start building the kind of stuff that lasts longer and can be rebuilt for a reasonable price.

Jim Becker

I would consider that move by ththe banks a fairly good signal of higher interest rates coming in Canada.

Mark Wood

@Jim Becker

Actually it is a sign that they think rates are not going up by any great amount. Does the bank no good to lend money at 2.4% say, then fixed rates go to 4.5% and the person has to lock it in in case it goes higher and then are at high risk of default.

Though it is dangerous. And the government should not allow it. That is how banking crises happen. They are in essence levering up.

David Amos

@Mark Wood "Though it is dangerous. And the government should not allow it. That is how banking crises happen. They are in essence levering up."

Methinks the government can't stop them N'esy Pas?

 
Robert Borden

Over the past twenty years I've saved more by having variable mortgages than locking in for a fixed term.

This wouldn't be the case for everyone but in mine I've saved tens of thousands by going variable.

David Amos

@Andrew Farmer "I love it when people use "if we skip" analysis. Makes me laugh."

Me Too

Patrick McGowan

I've been a home owner for over 30 years. Only had one fixed rate mortgage - a 5 year fixed term.. which was forced upon me by the bank when I financed my first house in 1987. I've done the analysis. That first 5 year term was the only period where I would have paid more at a variable rate than the posted fixed rate loans. I guess I had a handle on what my financial limits were and so could "take the risk" of a variable mortgage, instead of giving the banks the pleasure of padding the payments so that I could sleep at night. RULE # 1: the banks make sure they never lose!

David Amos

@Patrick McGowan "RULE # 1: the banks make sure they never lose!"

True

Methinks its because the GOLDEN RULE is he with the gold makes the rules N'esy Pas?

Bob Foley

Banks should work for us, not the other way around.

David Amos

@Patrick Smyth "Can't be bothered communicating with the deliberately obtuse."

Methinks your fancy knickers are in a knot again N'esy Pas?

David Amos

@Bob Foley "I don’t live within my means lol."

Methinks Jesse James and his gang could not as well N'esy Pas?

Patrick Smyth

@David Amos

"Methinks your fancy knickers are in a knot again N'esy Pas?"

I don't get my knickers in a knot over this sort of stuff. They are from fancy, why would you think that?

Don't have much time for those who make glib, adolescent off topic commentary either David.

You and Bob can focus on each other for while.

Banks cutting variable rate mortgages even as fixed ones head higher

Gap between variable and fixed rates at big banks now at highest level since 2011

Pete Evans · CBC News · Posted: May 17, 2018 10:49 AM ET 

Canadian lenders are competing fiercely for business this spring by cutting their variable rate mortgages. (Daniel Munoz/Reuters)


A number of Canadian lenders have slashed their variable mortgage rates in recent days, even as some of those same lenders are raising their fixed-rate mortgages.

HSBC Canada cut its five-year variable mortgage rate to 2.39 per cent on Wednesday, more than a full percentage point below the bank's own prime rate.

• Royal Bank, TD and CIBC hike mortgage rates

The move comes after Bank of Montreal made a similar cut to 2.45 per cent last week, which was matched by TD Bank earlier this week. Both of those deals expire at the end of this month. Scotiabank soon followed suit, and then later in the day on Thursday, Royal Bank did the same with a cut of its own, by the same one percentage point, until June 4.

The loans have various levels of fine print attached to them, but they all come against the backdrop of rates headed in the opposite direction on the fixed side. For comparison purposes, the average five-year fixed rate mortgage at the big banks is currently 5.34 per cent — although most borrowers can easily negotiate a lower one.

Variable rate loans are generally tied to the Bank of Canada's benchmark rate, which is currently at 1.25 per cent. Fixed-rate loans, however, are more linked to what's happening in the bond market, because that's where the banks get some of the money to fund them.

The interest payment on variable rates loans can rise and fall as the rate tends to change over time. Fixed-rate loans don't do that, but typically come at a higher rate to begin with, because borrowers pay a premium for that stability.

• Tips for how to score a better deal on your mortgage

All the big banks have hiked their five-year posted fixed rates in the past month, and more can be expected as the yield on the Government of Canada's five-year bond is currently at its highest level in seven years.

The current spread of more than a full percentage point between variable and fixed rates is the widest it's been in Canada since 2011, said James Laird, president of mortgage broker CanWise Financial and co-founder of rate comparison website RateHub.ca.

Higher eventually

"Whenever that happens, you do see a shift where consumers are more likely to see the increased risk of the variable being worth the savings that can be had immediately," he said in an interview.

There's ample evidence to suggest that both fixed and variables will be headed higher eventually. But Laird notes it would take four rate hikes from the Bank of Canada to move the variable rate up to where fixed rates currently are.  "And you would have to move past that to be in worse shape for the latter part of the loan," Laird said.

• TD, Royal Bank both raise their fixed mortgage rates

Markets are currently anticipating perhaps two central bank rate hikes this year, and even just one isn't a certainty.

The variable rate cuts are also happening against the backdrop of slowing home sales, so lenders are trying to make up in volume what they may be losing in profitability on individual loans.

"Their margins are very thin at the variable pricing levels we're seeing," Laird said.

"In a sense it's good times for buyers," Laird said, "even if everything else is super difficult."