Zoocasa
Real Estate Sold Prices
Calculator
Map
Property Trends & Insights
  • Blog Home
  • For Buyers
  • For Sellers
  • Real Estate News
  • Mortgage News in Canada
  • Free Guides (PDF)
  • Real Estate Infographics
  • Real Estate News
Zoocasa
Home Ask the Pros

Why Some Banks Have Lower Mortgage Rates, Despite New Rules

Mike Bricknell by Mike Bricknell
November 4, 2016
in Ask the Pros, Mortgage News
3 min read
Why do some banks have lower mortgage rates?
Share3
Tweet
Share12
15 Shares

As you may have read, TD Bank recently raised their prime lending rate to 2.85% – 15 basis points higher than the 2.70% advertised by the other banks. It’s a change that impacts those with a variable-rate mortgage; your monthly payment will remain the same, but the payment distribution to your principal debt will lesson and your interest portion of the payment will increase by 15 bps starting on November 1, 2016.

TD has since stated that they raised their rate to offset anticipated higher funding costs as a result of recent mortgage rule changes. So why, then, have smaller lenders since slashed their mortgage rates – and what does it mean for mortgage shoppers?

Why are non-bank lenders reducing rates?

If you go to ratehub.ca, you will see a recent decrease in mortgage rates, especially over the past few days. The difference between the smaller lenders and TD, though, is that they’re doing their best to capitalize on locking up new business before the November 30th deadline set by the Office of the Superintendent of Financial Institutions (OSFI). That’s great news for the marketplace and for customers who are looking to take advantage of these great rates on fully featured mortgage products.

What changes on November 30th?

On November 30th, the Department of Finance is mandating the Big Banks to hold back more money for the fear of future foreclosures on Canadian homes. Canadians have been warned for years now that these rate increases were coming, so it shouldn’t be a huge shock – but people still chose to accumulate unsustainable debt loads. TD’s move is a smart business move to take advantage of some early mortgage interest rate profits before the mandated reforms.

I have a fixed-rate mortgage or line of credit. Should I care about TD’s prime rate increase?

Quite simply, yes. While your rate is locked in for the remainder of your term and isn’t impacted by the prime rate, these changes will filter down to your cost of borrowing eventually.

We keep hearing that the Canadian housing market is over inflated, and housing is less affordable for many. OSFI has mandated changes to the Big Banks as a way to help soften these increasing home prices. These are in addition to the changes introduced on October 17th, which require those purchasing a home with less than a 20% down payment must qualify at the Bank of Canada’s 4.64% qualifying rate, regardless of which term you choose.

The new rule is impacting affordability: if you have a 5% down payment of $25,000 then you should be able to purchase a home for $500,000 based off of the 4.64% qualifying rate. Your monthly principal & interest payment should be around $2,762. With a decent credit score and little to no debt, you’d need at least a $90,000 household income to qualify.

Prior to October 17, you could have been able to afford 25% more of a home purchase price – with that much more affordability, you potentially could have moved to a different neighbourhood or even city to afford your preferred home.

I’m renewing or refinancing my mortgage. Will I be affected by the stress test?

Those who are renewing their mortgages won’t be subjected to the stress test, and those who are refinancing will likely avoid it, as they typically have more than 20% of their home’s value invested in equity. But these homeowners will still potentially be affected; all mortgages will be subject to possible rate increases or additional fees for refinancing your mortgage term, amortizing for more than 25 years, as well as houses valued over $1million. Many lenders have already begun to increase rates on these products.

Previous Post

Foreign Real Estate Investors Impact Vancouver – But Not Toronto

Next Post

Celebrity Homes of the Week: Amy Schumer, Ashley Olsen, Brad Pitt & Angelina Jolie, and Tobey Maguire & Jennifer Meyer

Mike Bricknell

Mike Bricknell

Mike is a Mortgage Agent with Canwise Financial and has been working in the mortgage industry since late 2008. Mike does his best to stay updated with the latest mortgage related news, and passes along sound advice to his centres of influence to build better, long lasting business relationships. Contact Mike today to serve your mortgage lending needs at [email protected] .

Related Posts

Ask the Pros

Should You Purchase a Home With an Open Floor Plan?

August 8, 2022
Ask the Pros

Your Home’s Screen Appeal: How to Stage Your Home for Photos and Videos

August 3, 2022
Ask the Pros

Is Home Insurance Mandatory in Ontario?

July 25, 2022

Blog Search

No Result
View All Result

Recent Articles

Variable or Fixed-Rate Mortgage? 4 Tips to Help You Decide Which to Choose While Interest Rates are Rising

August 17, 2022

Sharp Housing Adjustment as Sales Continue to Drop: CREA

August 15, 2022

Hidden Gems for Sale in Markham under $700,000

August 12, 2022

Rent or Buy? Average Monthly Rental Prices vs. Monthly Mortgage Payments in the GTA

August 10, 2022

Variable or Fixed-Rate Mortgage? 4 Tips to Help You Decide Which to Choose While Interest Rates are Rising

August 17, 2022

Sharp Housing Adjustment as Sales Continue to Drop: CREA

August 15, 2022

Hidden Gems for Sale in Markham under $700,000

August 12, 2022

Rent or Buy? Average Monthly Rental Prices vs. Monthly Mortgage Payments in the GTA

August 10, 2022

Should You Purchase a Home With an Open Floor Plan?

August 8, 2022

Condo Apartments Remain the Most Affordable and Second Most In-Demand Property Type in Toronto and GTA: TRREB

August 4, 2022

Newsletter Sign-up

Join a community of 130,000+ subscribers. Don't miss important real estate news, market data, and buying and selling tips.

Social Media

Featured Listings (Updated Weekly)

Hidden Gems for Sale in Markham under $700,000

August 12, 2022

The Most Expensive and Affordable Homes Sold in July in the GTA

July 29, 2022

The Most Viewed Homes in June 2022

July 22, 2022

Condos for Sale with Amenities in the GTA

July 11, 2022
first-time home buyer programs and rebates

About Zoocasa

Zoocasa.com is a full-service brokerage that offers advanced online search tools to empower Canadians with the data and expertise they need to make more successful real estate decisions.

Newsletter Sign-up

Join 130,000+ weekly subscribers. Don’t miss important real estate news, market data, and buying and selling tips: sign-up here.

Social Media

Zoocasa Tools

MLS Listings Canada
Search Sold Listings
iOS App
Android App
Find an Agent
Contact Us

  • Homes & Real Estate Properties
  • Terms of Use
  • Privacy Policy
  • Contact Us

© 2015 - 2022 Zoocasa Realty Inc., Brokerage

  • Blog Home
  • For Buyers
  • For Sellers
  • Real Estate News
  • Mortgage News in Canada
  • Free Guides (PDF)
  • Real Estate Infographics
  • Real Estate News
No Result
View All Result

© 2015 - 2022 Zoocasa Realty Inc., Brokerage