On January 13, 2012 ING announced it would be lowering the rate on its 10-year fixed mortgage to a record low of 3.99%. Other lenders soon followed suit and borrowers can now access 3.84% through mortgage providers on RateHub.ca.
Never before has a 10-year mortgage been a real consideration amongst average mortgage shoppers. In fact, according to the Canadian of Accredited Mortgage Professionals (CAAMP), in 2010 only 8.0% of Canadians held a mortgage term of over five years and only 1% more than 10 years. The spread between the best discounted 5-year fixed mortgage rates and 10-year rates now sits at less than 1.0%.
The 5-year fixed mortgage has traditionally been the most popular in Canada, but the 10-year product has a new appeal. A 10-year rate of 3.84% is well below the long-term 5-year fixed rate average, so if borrowers expect the market to normalise to long-term averages and mortgage rates to increase in the future, the 10-year rate could easily come out on top.
Says James Laird, VP of True North Mortgage ‘this is the first time a 10-year product is part of the conversation I will have with clients. Even with shorter term rates low as well, if when a borrower’s mortgage comes up for renewal in five years and mortgage rates are above the long-term average of around 5%, a 10-year rate could be less expensive. Plus, it is extremely attractive to take the risk out of financing and budget your housing costs for the next 10 years, whether you’re an investor or end-user with a long-term hold.’
The banks have never seen such a cheap source of financing with rock-bottom bond yields, and have responded by dropping mortgage rates to record lows. There has been much speculation as of late on overvalued real estate markets, particularly in Toronto and Vancouver, but with financing so inexpensive, the market may continue to flourish.
RateHub.ca is a web platform that compares Canadian mortgage rates supported with mortgage education and home buyer resources.