Mortgage rates in Canada just fell below 2% for the first time ever

 Investor Group has introduced a 3-year term mortgage rate below 2%, here is the news from Financial Post

Mortgage rates in Canada just fell below 2% for the first time ever
Garry Marr | May 13, 2014 | Last Updated: May 13


Investors Group has introduced what appears to be the deepest discount in Canadian history on a floating rate loan, offering a deal that takes an effective mortgage rate down to 1.99%

Investors Group rolls out 1.99% variable rate mortgage

If you thought mortgage rates could not go any lower, you were wrong.

Investors Group is rocking the mortgage world with what appears to be the deepest discount in Canadian history on a floating rate loan, offering a deal that takes an effective mortgage rate down to 1.99%.

The company is now offering 101 basis points or 1.01 percentage points off its prime rate of 3% for a variable rate mortgage. Consumers can get the deal for a 36-month term which is shorter than the length offered by some of the major banks on the deep discounted five-year fixed rate mortgage which has dropped to around 3% — a controversial level that once drew the wrath of the department of finance.


We haven’t seen a rate like this
.
“We haven’t seen a rate like this from a lender,” said Rob McLister, founder of www.ratespy.com. He said brokers have offered rates this low for variable rate products but usually only after buying down the rate which involves sacrificing their commission.

The offer from Investors Group is not available from brokers and is coming from the company’s own sources, designed to make a major splash in the marketplace


“They could have priced this at prime minus 80 and beat everybody in Canada. Obviously, they want to get people’s attention here,” said Mr. McLister, who is also editor of Canadian Mortgage Trends.

Peter Veselinovich, vice-president of banking and mortgages with Investors, said his financial institution was able to set aside a block of funding to be able to offer the cut rate deal.

“This [deal] will be driven by what the appetite is in the marketplace. It’s a limited time offer, it may be there 90 or 120 days or it may be there for 30,” said Mr. Veselinovich, whose company quietly brought in the cut-rate product Monday to bring in new customers for its other offerings. “It’s kind of the best kept secret in the marketplace.”

There are some conditions to the mortgage, namely you cannot break it without selling your home. Nevertheless, the loan does allow consumers to double up monthly payments and pay a lump sum of 15% of the mortgage every year.

The latest salvo in the mortgage rate wars comes in the aftermath of former finance minister Jim Flaherty’s death which happened shortly after he stepped down as finance minister.

Mr. Flaherty had intervened in the market to discourage banks from lowering their mortgage rates below 3% on five-year fixed terms, out of fear it would inflate the housing market.

In March, after new Finance Minister Joe Oliver was sworn in, Bank of Montreal jumped back into the market again with its 2.99% offer for a five-year fixed mortgage. Mr. Oliver has shown no interest in intervening in the market.

“Our Government has taken action in the past to reduce consumer indebtedness and the Government’s exposure to the housing market,” said Mr. Oliver, in a emailed statement to the Financial Post.

“I will continue to monitor the market closely. We took action four times, from 2008 to 2012. Budgets 2013 and 2014 announced additional measures to reduce the government’s exposure to the housing market. We will continue monitoring the market.”

 

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