Mortgage Rate War: How to Get the Best Deal
November 22, 2024 | Posted by: Keith Leighton
Mortgage Rate War: How to Get the Best Deal
The Canadian mortgage rate war is expected to intensify as lenders increasingly compete for renewal business. As mortgage rates remain high and many homeowners approach the end of their fixed-rate terms, lenders are vying to retain existing customers and attract new ones. The pressure comes from the fact that many Canadians who locked in lower rates a few years ago are now facing much higher renewal rates, which significantly increases their monthly payments.
Key factors driving this mortgage rate war include:
Rate Lock-Ins Ending: A large number of homeowners who took out mortgages at historically low rates in 2020-2021 are now nearing the end of their terms. With rates having risen sharply since then, their new renewal rates could be double or more what they were originally paying.
Intense Competition Among Lenders: Major banks, credit unions, and non-bank lenders are eager to retain customers and prevent them from shopping around for better deals. To attract business, lenders are offering discounts on posted rates, cash-back incentives, and other perks like covering appraisal fees or providing flexible payment options.
High Consumer Debt Loads: Canadians are among the most indebted populations in the world, with much of that debt in the form of mortgages. As a result, many households are particularly sensitive to increases in borrowing costs. To avoid defaults or struggles with payments, lenders are under pressure to provide competitive renewal rates.
Slowing Housing Market: The Canadian housing market has cooled in recent months due to higher interest rates and affordability challenges. As demand for new mortgages slows, lenders are focusing more on retaining and renewing existing clients.
Bank of Canada Interest Rates: While the Bank of Canada has paused its rate hikes in recent meetings, the overnight rate remains at its highest level in over two decades. This affects both fixed and variable mortgage rates, making affordability a significant concern for many homeowners.
Impact on Borrowers
Borrowers should prepare for a highly competitive environment when their mortgage term comes up for renewal. They may benefit from shopping around, as many lenders will be willing to offer incentives to retain their business. However, it's important for homeowners to understand their options, including whether to lock in a fixed rate or stay variable, based on the interest rate outlook and personal financial situations. If you're approaching a renewal or considering refinancing, it's wise to explore multiple offers and consult with a DLC Ideal Mortgage broker to guide you through the mortgage process.
