Blog : Mortgage

7 Questions To Ask Yourself Before Building a Home

7 Questions To Ask Yourself Before Building a Home

Building your dream home can sound really exciting, but have you thought about everything that goes into building a new home?

Here are 7 Questions you should ask yourself before making any concrete plans!

1. What are my expectations with this new home?

Are you looking for a custom home build where you are responsible for every single decision made or do you want to choose an existing floor plan and build a house that is almost entirely predetermined for you? Or maybe you are looking for a mix of both? Regardless…

Every home builder has a unique approach to building. Make sure your level of involvement is crystal clear from the start!

2. How familiar am I with the local builders and the homes they build?

Although there are standards for how your home will be built (code), there are no standards for pricing. Each builder will quote prices using different specifications for the different homes they build. If one builder is coming in with a estimated build price that is considerable less than another builder, you should dig deeper into the quality of materials being used.

Is the flooring hardwood and tile or carpet and lino? Am I getting the basic white appliance package or stainless steel (or are appliances even included?).

Knowing your local builders and the homes they build will let you compare apples to apples and ensure you get the best home!

3. Do I have any specific needs or features I want included?

If you are looking to add a feature to your home to meet a specific need, make sure your builder has previous experience building in this area. Practical features like wheel chair accessibility or a separate basement suite should be considered as well as lifestyle features like a backyard pool or a below the kitchen wine cellar.

Always consider experience when choosing a builder and don’t be afraid to ask for references!

Backyard-Pool

4. Is possession date important to me?

Building a home is a long process, there are so many moving parts that delays are almost inevitable. If you have a specific timeline with a very narrow window for possession, building might not be your best option.

If you don’t have flexibility around when you take possession of your new home, building might not be your best option.

5. Can I afford this home if interest rates go up before I take possession?

Given that the building a home has no guaranteed end date, it is important to take a comprehensive look at your personal finances and discuss your financing options with a mortgage professional. That is where I come in!

Because most lenders will only hold an interest rate for 120 days, it’s a good idea to make sure that you have allowed some room in your debt service ratios for a potential rate increase before possession date.

6. How well do I handle stressful situations?

Building a home can be a very stressful experience, there is no doubt about it. How well you handle stress should determine what type of house you build. Go back to point one and determine your expectations with an honest evaluation of not only what you want, but what you are capable of handling!

7. Is it better for me to build a home or buy an existing home?

Sometimes people fall in love with the idea of building a home more than they actually enjoy building the home! There is a chance your dream home is out there, already built, priced comparably, ready to buy without going through 2 years of waiting, decision making and delays!

Make sure you are looking at ALL your options and not just fixating on building for the sake of building!

If you are considering building a home, please let me know… I would love to discuss some of the financing options available to you!  Please contact me anytime at 416.945.9123 or by email at mat@fugeremortgage.ca and I will be in touch!

Mortgage Brokers Continue Fight for Competition

Mortgage Brokers Continue Fight for Competition

As you may well be aware, the government has recently made changes to the way mortgages are qualified through the Canadian Mortgage and Housing Corporation (CMHC). In short, these changes have made it more expensive for some of the broker channel lenders to fund mortgages, the increased cost of doing business is then passed on to consumers through higher interest rates. This government intervention has led to an unfair playing field, which means when you consider all your mortgage options, you now have less options than you did before. As an industry, we don’t believe this is right, and we’ve taken our concerns to Ottawa. 

Here is an article titled Mortgage Industry Voices Concerns to Ottawa that was published on Canadian Mortgage Trends, a publication of Mortgage Professionals Canada. It provides a highlight of what mortgage brokers are doing to continue the fight for better mortgage products for Canadians. 

Mortgage Industry Voices Concerns to Ottawa

A delegation of mortgage industry leaders went to Ottawa this month. Its mission: to educate lawmakers about the implications of the latest mortgage regulations.

The event, organized by Mortgage Professionals Canada, was its first-ever Parliament Hill Advocacy Days. In just over two days, the group participated in more than 30 meetings involving more than 100 members of parliament, senators and senior policy staff.

The association’s core message centred on the economic ramifications of the new policies that came into effect last fall and January.

Face-to-Face Progress

“Many of the MPs could describe stories from their own riding of homebuyers who were affected by these changes,” said Paul Taylor, President of Mortgage Professionals Canada. “Others were less familiar with our issues but were appreciative of us bringing them to their attention. In all cases, we were delivering messaging to support the channel, to support choice and accessibility for the Canadian consumers we all serve day to day…”

Among those who participated in the effort were familiar industry names like Boris Bozic (Merix Financial), Eddy Cocciollo (Mortgage Centre), Jared Dreyer (VERICO Dreyer Group Mortgage Brokers), Claude Girard (Laurentian Bank), Dan Putnam (CLMS), Amanda Roy-Macfarlane (AMBA), Hali Strandlund (Fisgard Asset Management), Michael Wolfe (AMBA) and Dustan Woodhouse (DLC), among others.

The group conveyed to parliamentarians the recommendations that Mortgage Professionals Canada has publicly put forward, including asking the government for a moratorium on further rule changes for the next 12-18 months, as well as revisiting its anti-competitive position on refinancing.

Boris Bozic, CEO of Merix, said one of the key concerns was the new stress test rules and the need for any changes to be applied to all mortgage types (not just insured mortgages), and all financial institutions. “If the government is truly concerned about debt levels being incurred by Canadian homeowners, the stress test should be applied equally,” he said. “This would ensure that Canadian homeowners continue to have choice, and allow Canadian borrowers to benefit from competition.”

Overall, the group was pleased with how their position was received by members of parliament and other government officials.

“Our concerns were heard and appreciated by all the MPs we met with, irrespective of party affiliation,” Bozic said. “They all committed to raising the issue with their colleagues and sharing our recommendations for slight modifications to the new rules imposed on our industry and middle-class Canadians. Time will tell if the Department of Finance will be receptive to the modifications we suggested.”

Dunning Takes on the DoF

Mortgage Professionals Canada’s chief economist Will Dunning also made a submission to the Standing Committee on Finance in which he presented his analysis of the flaws with the government’s changes and the risks they pose.

“The policies announced on October 3 will reduce housing activity and weaken the broader economy,” Dunning said. “Even in the very best of economic times, a policy that will weaken the economy should be undertaken only after thorough discussion.”

He noted that the Trump presidency raises economic risks for Canada, which he argues justifies rescinding the government’s changes to mortgage insurance. Here’s Dunning’s analysis.

The Next Steps

In an update posted on its website, Mortgage Professionals Canada outlined the expected timeline for the Standing Committee on Finance to finalize its report and recommendations for the Minister based on the testimonies it heard concerning the mortgage changes.

The report isn’t expected to be tabled and made public until at least July or August. In the meantime, the association says the industry “needs to remain active in educating MPs, officials, and the Minister of Finance on how these changes will increase interest burdens, obstruct competition and harm local economies across Canada.”

The mortgage industry has another shot at having its voice heard this Wednesday when DLC President Gary Mauris and our own Editor Robert McLister meet with Deputy Bank of Canada Governor Larry Schembri. The Bank of Canada routinely consults with the Department of Finance on housing issues and Schembri aims to better understand our industry’s perspectives on its policy changes. We’ll keep you posted on that meeting.

Bank of Canada Rate Announcement Mar 1st, 2017

Bank of Canada Rate Announcement Mar 1st, 2017

The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1/2 per cent. The Bank Rate is correspondingly 3/4 per cent and the deposit rate is 1/4 per cent.

CPI inflation rose to 2.1 per cent in January, reflecting higher energy prices due in part to carbon pricing measures introduced in two provinces. The Bank is looking through these effects, as their impact on inflation will be temporary. The Bank’s three measures of core inflation, taken together, continue to point to material excess capacity in the economy.

Overall, recent data on the global and Canadian economies have been consistent with the Bank’s projection of improving growth, as set out in the January Monetary Policy Report (MPR). In Canada, recent consumption and housing indicators suggest growth in the fourth quarter of 2016 may have been slightly stronger than expected. However, exports continue to face the ongoing competitiveness challenges described in the January MPR. The Canadian dollar and bond yields remain near levels observed at that time. While there have been recent gains in employment, subdued growth in wages and hours worked continue to reflect persistent economic slack in Canada, in contrast to the United States.

The Bank’s Governing Council remains attentive to the impact of significant uncertainties weighing on the outlook and continues to monitor risks outlined in the January MPR. In this context, Governing Council judges that the current stance of monetary policy is still appropriate and maintains the target for the overnight rate at 1/2 per cent.

Here are the announcements dates set our for 2017.

  • Wednesday 12 April*
  • Wednesday 24 May
  • Wednesday 12 July*
  • Wednesday 6 September
  • Wednesday 25 October*
  • Wednesday 6 December

*Monetary Policy Report published

All rate announcements will be made at 10:00 (ET), and the Monetary Policy Report will continue to be published concurrently with the January, April, July and October rate announcements.

Just How Big is the Canadian Mortgage Market Really?

Just How Big is the Canadian Mortgage Market Really?

With all the government changes happening in the mortgage market right now, the good people over at Mortgage Professionals Canada via their online publication Canadian Mortgage Trends just published an interesting couple of articles on their blog. Most recently “How Big is Canada’s Mortgage Market” gives perspective to just how much money is leant annually through mortgage financing, while providing context to the importance of their recent article “DOF Challenged in Parliament”

Here are both of these articles in their entirety. If you have any questions about what is going on with mortgages, or want to have a look at your financial situation to see where you stand, please contact me anytime at 416.945.9123 or by email at mat@fugeremortgage.ca

Oh, and if you just want to know how big the Canadian mortgage market is – well, estimates would say that over $400 Billion in mortgages is written each year in Canada. That is a lot of money.

How Big is Canada’s Mortgage Market?

Thems are some big shoes

When it comes to the total mortgages arranged in Canada each year (by all lenders), definitive data isn’t easy to find. So we have to rely on estimates.

CIBC economist Benjamin Tal is one of the best estimators out there. And his latest figures suggest the market is a lot bigger than some in our business may think.

The estimates we typically cite for annual residential mortgage originations range from about $210 to $250 billion. But that doesn’t include renewals.

By Tal’s calculations, the total of all residential mortgages negotiated or renegotiated in 2016 was $405 billion. This figure is a much truer indication of what the theoretical potential market is for mortgage lenders.

This data includes purchases, refinances and renewals of owner-occupied and residential investment properties (including 1- to 4-unit and 5+ unit residential properties).

Tal writes that the total number is up 5.5% over 2015. Canada’s “typical” home price rose 13% in the same timeframe, according to Royal LePage data. But with insurers already citing a 15-20% drop in business since the mortgage rule changes, 2017 volumes won’t be as rosy.

DoF Challenged in Parliament

Ottawa Canada. November 14th 2016 - Parliament of Canada on Parliament Hill in Ottawa
Ottawa Canada. November 14th 2016 – Parliament of Canada on Parliament Hill in Ottawa

MPs are questioning why the Liberal government took liquidity out of the refinance market, and Dan Albas is one of the most vocal.

In the House of Commons yesterday, the Conservative MP charged the Department of Finance with “Increasing interest costs on refinanced mortgages.” This of course is a result of the Finance Minister’s ban on default insuring refinances. The move has decimated competition in the refi space, which Albas says “hurts middle-class Canadians.”

“Will the Liberals reverse this punitive and damaging change?” he questioned on his Facebook page today. Albas asked the equivalent in Parliament yesterday, to which the Parliamentary Secretary to the Minister of Finance responded but, “didn’t answer the question at all!” Albas charges.

Here’s a video of that exchange…

This debate followed hours of testimony these past two weeks about the new mortgage rules. Those hearings were held by Parliament’s Finance Committee and included 38 expert witnesses.

In an opinion piece today that touched on the hearings, Albas said:

As the public servants involved in this area could not provide a coherent reason for this punitive [refinance] policy, a motion I put forward to have the Finance Minister appear directly before the Finance Committee was adopted thanks in part to some Liberal MPs voting in support.

It appears, however, the Finance Minister is sending others to talk for him (on Monday), namely:

  • Ginette Petitpas Taylor, Parliamentary Secretary to the Minister of Finance
  • Rob Stewart, Associate Deputy Minister, Department of Finance
  • Cynthia Leach, Chief, Housing Finance, Capital Markets Division, Financial Sector Policy Branch, Department of Finance

CMHC head Evan Siddall will also speak at the same meeting. Siddall has been quoted by Bloomberg as saying lenders have “no skin in the game” and “misaligned” incentives, which he later called a misstatement on his part. So the mortgage industry will be watching for any new bombs he might drop on Monday.

Can I Get A Mortgage With No Downpayment?

Can I Get A Mortgage With No Downpayment?

The simple answer to this question is no. In order to secure mortgage financing in Canada you have to come up with at least a 5% downpayment.

Now, if you haven’t set aside the 5% for a downpayment in your savings account, that is okay. There are still a few ways to get you a mortgage.

Gifted Downpayment

With the cost of living going up all the time, there is no doubt that saving for a downpayment is harder now than it once was. If you have a family member who has money and is willing to help you buy a property, they can gift you the funds for your downpayment.

The gift has to come from an immediate family member who will sign a gift letter indicating there is no schedule of repayment and that the gift doesn’t have to be repaid. Proof that the money has been deposited to your account will be required through bank statements.

Gifted funds can make up part of or the entire amount of downpayment. For example; you are purchasing a property for $300k, you have $10k saved up, your parents are able to gift you the remaining $5k to make up the total 5% downpayment.

Borrowed Downpayment

If you aren’t fortunate enough to have a family member who can gift you a downpayment but you have excellent credit and a high income compared to what you are borrowing, you might qualify to borrow your downpayment. This would be separate from and in addition to the mortgage funds.

It is possible to borrow your 5% downpayment as long as you include the payments in your debt service ratios.

The Canadian Mortgage and Housing Corporation (CMHC) has a program that allows you to use Non-Traditional Sources of Downpayment, which is described as “any source that is arm’s length to and not tied to the purchase and sale of the property, such as borrowed funds, 100% sweat equity, lender cash back incentives.” Reference: CMHC Quick Reference Guide.

For example; you are purchasing a property for $250k and you have a line of credit with a $20k limit but no outstanding balance. You could use that line of credit to borrow the $12,500 needed for the 5% downpayment assuming you can afford to carry the additional debt of the payments from the line of credit. Typically this is figured at 3% of the outstanding balance, in this case $375 per month.

RRSP Homes Buyers Plan

Okay, so you don’t have the money set aside in your savings, but you do have a nice little RRSP going. Assuming you are a first time home buyer, you can access the money from your RRSP Tax Free to use as a downpayment. You are able to access up to $25k individually or $50k as a couple and the money has to be paid back into your RRSPs over the next 15 years.

Below is the Home Buyer’s Plan (HBP) PDF document from Canada Revenue Agency for your reference.

Home Buyers Plan (HBP) – CRA

Regardless of how much money you have available to you at this time for a downpayment, if you are considering purchasing a property in the near future, please let me know.

It’s never too early to start the conversation about getting pre-approved for a mortgage.

Please contact me anytime at 416.945.9123 or by email at mat@fugeremortgage.ca!

Bank of Canada Rate Announcement Jan 18th, 2017

Bank of Canada Rate Announcement Jan 18th, 2017

Looks like 2017 begins the same way 2016 ended, with the Bank of Canada announcing that it has maintained its target for the overnight rate at 1/2 percent. While the Bank Rate is correspondingly 3/4 of a percent, with the deposit rate holding steady at 1/4 percent as well. The Bank of Canada also released it’s January 2017 Monetary Policy Report and noted that “The Canadian economy is expected to expand by 2.1% this year and in 2018.”

What does this mean for you? It means everything today is exactly as it was yesterday… which isn’t saying much, as yesterday (in case you missed it) had CMHC announce that they were increasing mortgage insurance premiums. Click here to have a read.

The official announcement goes on to say that:

Uncertainty about the global outlook is undiminished, particularly with respect to policies in the United States. The Bank has made initial assumptions about prospective tax policies only, resulting in a modest upward revision to its US growth outlook. Overall, the global economy is strengthening largely as expected and prices of some commodities, including oil, have risen. The rapid back-up in global bond yields, partly reflecting market anticipation of US fiscal expansion, has pulled up Canadian yields relative to the October Monetary Policy Report (MPR).

In contrast to the United States, Canada’s economy continues to operate with material excess capacity. While employment growth has remained firm, indicators still point to significant slack in the labour market. The resource sector’s adjustment to past commodity price declines appears to be largely complete, but negative wealth and income effects will persist. Meanwhile, the Canadian dollar has strengthened along with the US dollar against other currencies, exacerbating ongoing competitiveness challenges and muting the outlook for exports. Consumption is expected to remain solid, while residential investment will be tempered by previously announced changes to housing finance rules and by mortgage rates that have risen in response to higher bond yields. Federal and provincial fiscal measures are still expected to support growth in 2017.

Bearing in mind the important assumptions embedded in its forecast, the Bank projects that Canada’s real GDP will grow by 2.1 per cent in both 2017 and 2018. This implies a return to full capacity around mid-2018, in line with October’s projection.

Inflation in Canada has been lower than anticipated since October, mainly because of declines in food prices. Measures of core inflation are below 2 per cent, reflecting material excess capacity in the economy. As consumer energy prices rise and the impact of lower food prices dissipates, inflation is expected to move close to the 2 per cent target in the months ahead and remain there throughout the projection horizon while excess capacity is being absorbed.

In the context of a projection that is largely unchanged, the Bank’s Governing Council judges that the current stance of monetary policy is still appropriate and maintains the target for the overnight rate at 1/2 per cent. Governing Council will continue to assess the impact of ongoing developments, mindful of the significant uncertainties weighing on the outlook.

Here are the announcements dates set our for 2017.

  • Wednesday 1 March
  • Wednesday 12 April*
  • Wednesday 24 May
  • Wednesday 12 July*
  • Wednesday 6 September
  • Wednesday 25 October*
  • Wednesday 6 December

*Monetary Policy Report published

All rate announcements will be made at 10:00 (ET), and the Monetary Policy Report will continue to be published concurrently with the January, April, July and October rate announcements.

January 2017 Monetary Policy Report

Annual State of the Residential Mortgage Market in Canada December 2016

Annual State of the Residential Mortgage Market in Canada December 2016

Every year, Mortgage Professionals Canada (Canada’s national mortgage broker association) releases a report called The Annual State of the Residential Mortgage Market in Canada. Prepared by MPC Chief Economist Will Dunning, the report is a collection of surveys that compiles data on mortgage transactions and consumer sentiment.

Below is the press release from Mortgage Professionals Canada with their highlights, along with a copy of this lengthy document. Expect to see some more highlights on the blog in the coming days! There is certainly a lot of great information in this report! 

Rental Income and Housing Affordability Highlight a “New Normal” For Young Canadians in the Mortgage Market

Canadians who purchased their first home within the past two years reflect a “new normal” in the Canadian housing market, according to Mortgage Professionals Canada’s fall 2016 survey. Thirty-four per cent of recent first time buyers think it is important to generate income from their properties, and 13 per cent of those who undertook renovations on their homes did so to add space for a rental unit. Half of 18-34 year-olds do not own a home, primarily because they are saving for a down payment.

“Creating income remains a useful tool for first-time homebuyers,” said Paul Taylor, President of Mortgage Professionals Canada. “People are looking for ways to make owning a home more affordable. Generating income allows them to reduce their mortgage more quickly.”

Canadians responding to the survey underscore this point. For homes purchased during 2014 to 2016, the average contracted amortization period is 22.4 years. Each year more than a third of mortgage holders take actions that will shorten their amortization periods. The most recent buyers expect that, on average, they will repay their mortgages in 18.8 years, which is 3.6 years shorter than their average contracted period.

On October 3, the federal government announced that for all insured mortgages, the borrower’s ability to afford the payments must be tested using the “posted rate”, which is currently 4.64% and far above the actual interest rates found in the market.

“It is too soon to measure the impacts of this policy change,” said Will Dunning, Mortgage Professionals Canada Chief Economist and author of the Annual State of the Residential Mortgage Market in Canada report. “The survey finds that among potential homebuyers who expect to be subject to that test, their ability to buy a home will be impaired. As a result, they also expect that there will be negative impacts in the overall housing market and in the broader economy.”

Read the rest of the press release here >>

Annual State of the Residential Mortgage Market in Canada

Bank of Canada Rate Announcement Dec 7th, 2016

Bank of Canada Rate Announcement Dec 7th, 2016

No big shocker here, in the final rate announcement of 2016, just as every economist in the country predicted, the Bank of Canada announced this morning that it is maintaining its target for the overnight rate at 1/2 per cent. The Bank Rate is correspondingly 3/4 per cent and the deposit rate is 1/4 per cent. 

Economic data suggest that global economic conditions have strengthened, as the Bank anticipated in its October Monetary Policy Report (MPR). However, uncertainty, which has been undermining business confidence and dampening investment in Canada’s major trading partners, remains undiminished. Following the election in the United States, there has been a rapid back-up in global bond yields, partly reflecting market anticipation of fiscal expansion in a US economy that is near full capacity. Canadian yields have risen significantly in this context.

In Canada, the dynamics of growth are largely as the Bank anticipated. Following a very weak first half of 2016, growth in the third quarter rebounded strongly, but more moderate growth is anticipated in the fourth quarter. Consumption growth was robust in the third quarter, supported by the new Canada Child Benefit, while the effects of federal infrastructure spending are not yet evident in the GDP data. Meanwhile, business investment and non-energy goods exports continue to disappoint. There have been ongoing gains in employment, but a significant amount of economic slack remains in Canada, in contrast to the United States. While household imbalances continue to rise, these will be mitigated over time by announced changes to housing finance rules.

Total CPI inflation has picked up in recent months but is slightly below expectations, largely because of lower food prices. Core inflation is close to 2 per cent because the effect of persistent economic slack is still being offset by that of past exchange rate depreciation, although the latter effect is dissipating.

Overall, the Bank’s Governing Council judges that the current stance of monetary policy remains appropriate. Therefore, the target for the overnight rate remains at 1/2 per cent.

You can read the official report here. 

Here are the announcements dates set our for 2017.

  • Wednesday 18 January*
  • Wednesday 1 March
  • Wednesday 12 April*
  • Wednesday 24 May
  • Wednesday 12 July*
  • Wednesday 6 September
  • Wednesday 25 October*
  • Wednesday 6 December

*Monetary Policy Report published

All rate announcements will be made at 10:00 (ET), and the Monetary Policy Report will continue to be published concurrently with the January, April, July and October rate announcements.

Are Rates Finally Going Up?

Are Rates Finally Going Up?

Well, after many years of unprecedented low interest rates in Canada, it appears the Canadian government by way of rule changes, and the American government by way of Trump, are impacting mortgage rates. Simply put, the Canadian government has recently made it more expensive for banks to lend money, while predictions of the policies that could be implemented by Donald Trump as the new President of the United States has impacted the bond market, which in turn compels lenders to increase rates.

Earlier this month TD announced that they were increasing their TD Mortgage Prime Rate to 2.85%, and if you have already scrolled through your news feed this morning, you will have seen that RBC increased their fixed rate mortgage pricing effective immediately. In typical fashion, it won’t be long until most lenders follow suit and we see increases to mortgage rates across the board. Because let’s face it, banks will use any excuse to make their businesses more profitable.

There is certainly no reason to panic, this seems more like a correction than anything, however, are rates finally heading upwards? It appears that way.

So what does this mean to you? Well… here are some action points.

  • If you have a mortgage that renews in the next 6 months, let’s talk, we can look at your options, and determine the best course of action for you.
  • If you have been thinking about refinancing your mortgage to access equity, there is no time like the present. Let’s talk.
  • If you have been sitting on the fence, considering a venture into the housing market, but aren’t sure… it’s probably a good idea to at least get a pre-approval and hold a rate for up to 120 days. No obligation, but if rates are going up, a rate hold now makes sure you save some money if you decide to make your move.
  • If you are thinking to yourself, I have no idea what I should do… it never hurts to get in touch.

As you can see, regardless of your situation, if you have mortgage questions, please contact me anytime at 416.945.9123 or by email at mat@fugeremortgage.ca, I would love to talk through your options and help you figure out a plan that works for you. I’m never too busy for new clients, or to connect with existing clients.

When Prime Rates Differ?

When Prime Rates Differ?

Although the recent changes to mortgage qualification introduced by the government were intended to create stability in the Canadian housing market, the unintended consequences might have been to make the waters a little muddier. For the first time, it looks like Canadians weighing their mortgage options will have to be aware that not only do different lenders offer different products at different rates, but that the baseline for rate calculation might be different between lenders as well. Comparing apples to apples and oranges to oranges just became more difficult.

You see, in response to these latest changes by the government, last week TD announced that it was raising its TD Mortgage Prime rate to 2.85%, up from 2.70% effective November 1st, 2016. Speculation was that the other major banks would follow suit, however it’s a week later, and still we have no action. This is clearly a pre-emptive move by TD in anticipation of higher mortgage funding costs. And you can’t hold it against them, banks are really good at making money, and they do that by charging interest on lending products to consumers. Well, that and debit transaction fees, but that’s an entirely different topic altogether.

Customers with fixed rate mortgages will be unaffected by these changes, however variable rate mortgage holders will now be paying more interest at TD than any other bank in Canada. But here is where things get complicated, although variable rate mortgages are based on the prime rate (which is now not consistent between all lenders) there is usually what is called a “component to prime”, so it’s usually prime rate, plus or minus a component. At the time this was published most lenders are offering a discount of around a half a percentage point on their variable rate products. With a higher prime rate, TD could effectively offer a deeper discount, and appear like they are offering the lowest rate on the market, but in actual fact, they would be at a higher effective rate.

This certainly isn’t meant to be a slam against TD bank, TD has offered some great products in the past, and will no doubt continue to do so. The main point of this article is simply:

Banks are in the business of making money, mortgage brokers are in the business of taking care of their clients.

With all the products available on the market, how do you know which one is best for you? That’s where I come in. I am an independent mortgage professional, my obligation is to you, my job is to know the ins and outs of all the products offered by different lenders, so that you don’t have to. So regardless of what bank is offering what prime with whatever discount, you have someone who sees through the noise, assesses your needs, and recommends a mortgage solution that is best for you.

If you have any questions, or would like to discuss your mortgage, please contact me anytime at 416.945.9123 or by email at mat@fugeremortgage.ca , I would love to hear from you!