Borrowers can renew at pre-2014 interest rate

The rising interest rate environment has induced disquiet in homeowners, but there appears to be good news for mortgage holders due for renewal in 2019.

That’s because those five-year fixed terms were locked in at 3.65%, and high-ratio mortgage holders can now renew at 3.39%.

“What this highlights is the way interest rates work, and with banks having their high posted rates, five years ago Canadians didn’t all necessarily get the best rates, which is obvious by them telling us their average is 3.65% even though there were lower rates available back then. With this being the average fixed rate of what people have, today’s rates are lower or the same, depending on their situation.”

While one can still argue that a mortgage stress test wasn’t in play five years ago, a few mitigating factors, including a thriving economy, are aligning fortuitously for Canadians.

“If you switch lenders now, you have to pass the stress test, but it’s likely most people would pass the stress test anyway if you got a mortgage five years ago,” said Laird. “One, they weren’t necessarily maxed out when they purchased, and two, household income has likely gone up. The key message we’re suggesting for people with renewals coming up in 2019 is they should shop around to see what rates are available. Most will qualify.”

The survey also had some auspicious news for the broker channel: 66% of homeowners surveyed believe they can get the best rate by going to a mortgage broker.

“That’s in spite of the fact that 64% of them did not use a broker when they got their first mortgage,” continued Laird. “The broker channel has the ability to grow because homeowners believe they can get the best rate by going to a broker, which is great news for our industry.”

Consumers’ willingness to use mortgage brokers is very likely the result of B-20. Chris Allard, a broker with DLC Smart Debt, has received substantially more queries this year than in the past because of the OSFI-mandated barriers in consumers’ way.

“Even though we’re getting more business, it’s not great for the consumer,” he said. “It really forces us mortgage brokers to be proper advisors and help plan how to get a particular borrower from a high-rate mortgage to a low-rate mortgage. We set them up with a one- or two-year term to readjust their credit so they qualify in a year or two. It means we have repeat clients a year or two down the road.”

Neil Sharman