No matter what Jim Flaherty says, as with hotel room rates or Turkish carpets, what you pay for your mortgage depends a lot on your willingness to shop around and haggle.
Despite the federal Finance Minister’s intervention this week, which led Manulife Bank to withdraw its offer of a five-year 2.89-per-cent fixed rate, borrowers can still easily find better deals, either through mortgage brokers or by bargaining with their banks.
“Posted rates are rates that are advertised typically by banks as their standard rates. But obviously there’s a lot of room for negotiations with the bank. Many are offering rates well below their posted rates,” said Ron Butler, a spokesman for Mississauga-based Butler Mortgage Inc.
Mr. Butler’s brokerage for example is offering a 2.77-per-cent fixed rate for five-year mortgages.
He said he agreed with Mr. Flaherty’s desire to limit household debt and prevent property values from spinning out of control. But he predicted that the Minister’s efforts will have “limited impact.”
Part of the problem stems from Ottawa’s tighter mortgage insurance rules, which has reduced the size of the market and made it more competitive, said Anne-Marie Desmarais, a mortgage broker with Réseau hypothèque in Montreal.
“There’s a rate war that’s directly linked to the latest mortgage guidelines,” she said.
Mr. Flaherty last year reduced the maximum amortization period to 25 years from 30 years. Also, the maximum amount of equity homeowners can take out of their homes in a refinancing was reduced to 80 per cent from 85 per cent.
Before getting his officials to contact Manulife on Monday, Mr. Flaherty had also unsuccessfully complained two weeks ago about Bank of Montreal cutting its rate to 2.99 per cent.
“My concern, for a number of years with very low interest rates, is to ensure that people can afford their mortgages when interest rates go up,” Mr. Flaherty said Wednesday, on the eve of the federal budget.
The Minister’s interventions raised grumbles in the chartered banking community, especially since others lenders, such as credit unions, are not federally regulated.
Also, non-bank financing companies, such as First National Financial, Street Capital Financial, MCAP or Radius Financial, are huge mortgage lenders, Mr. Butler said.
Not being under federal regulations, “they are not subject to Mr. Flaherty’s phone calls,” he said.
Those non-bank lenders are not as broadly known and usually get their businesses through mortgage brokers.
Rates that are lower that those posted by banks can also be found on websites such as ratesupermarket.ca or ratehub.ca, Mr. Butler said.
He noted that Canadians who are renewing their mortgage contracts are not acquiring new debt. “Those people would hope to be able to get low rates, which they should be entitled to.”
Out of habit or comfort, many people prefer dealing with their bank. But even there, borrowers can get better deals, either if they are favoured customers or if they bargain hard.
Ms. Desmarais said some banks are willing to lose profit on a lower mortgage rate if it helps retain a customer’s patronage, then recouping money through the sale of other services such as insurance or registered retirement plans.
The Minister’s intervention has ironically undercut his attempt at keeping borrowers from rate discounts, Mr. Butler said.
“It’s the opposite of what he wanted to achieved. He’s trying to get low rates to be less publicized.
“His thought process is fair. He wants to stop household debt, he wants to slow down overheated property prices.”
There was little sympathy for Mr. Flaherty among homeowners who recently renewed their mortgages.
“Banks do not normally do any favour to customers. When they do so by reducing the interest rates, the finance minister should not throw spokes in the wheel,” said Balaji Muthukrishnan, a home owner in Markham, Ont.
“Let the bank and market decide what is right for lenders.”