{"id":8028,"date":"2016-11-04T11:56:32","date_gmt":"2016-11-04T15:56:32","guid":{"rendered":"https:\/\/www.zoocasa.com\/blog\/?p=8028"},"modified":"2016-11-07T14:28:42","modified_gmt":"2016-11-07T19:28:42","slug":"why-some-banks-have-lower-mortgage-rates-despite-new-rules","status":"publish","type":"post","link":"https:\/\/www.zoocasa.com\/blog\/why-some-banks-have-lower-mortgage-rates-despite-new-rules\/","title":{"rendered":"Why Some Banks Have Lower Mortgage Rates, Despite New Rules"},"content":{"rendered":"

As you may have read, TD Bank recently raised their prime lending rate<\/a> to 2.85% \u2013 15 basis points higher than the 2.70% advertised by the other banks. It\u2019s 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.<\/p>\n

TD has since stated that they raised their rate to offset anticipated higher funding costs as a result of recent mortgage rule changes<\/a>. So why, then, have smaller lenders since slashed their mortgage rates \u2013 and what does it mean for mortgage shoppers?<\/p>\n

Why are non-bank lenders reducing rates?<\/h2>\n

If you go to ratehub.ca<\/a>, 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\u2019re doing their best to capitalize on locking up new business before the November 30th<\/sup> deadline set by the Office of the Superintendent of Financial Institutions (OSFI). That\u2019s great news for the marketplace and for customers who are looking to take advantage of these great rates on fully featured mortgage products.<\/p>\n

What changes on November 30th<\/sup>?<\/h2>\n

On November 30th<\/sup>, the Department of Finance\u00a0is 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\u2019t be a huge shock – but people still chose to accumulate unsustainable debt loads. TD\u2019s move is a smart business move to take advantage of some early mortgage interest rate profits before the\u00a0mandated reforms.<\/p>\n

I have a fixed-rate mortgage or line of credit. Should I care about TD\u2019s prime rate increase?<\/h2>\n

Quite simply, yes. While your rate is locked in for the remainder of your term and isn\u2019t impacted by the prime rate, these changes will filter down to your cost of borrowing eventually.<\/p>\n

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<\/sup>, which require\u00a0those purchasing a home with less than a 20% down payment must qualify at the Bank of Canada\u2019s 4.64% qualifying rate, regardless of which term you choose.<\/p>\n

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\u2019d need at least a $90,000 household income to qualify.<\/p>\n

Prior to October 17, you could have been able to afford 25% more of a home purchase price \u2013 with that much more affordability, you potentially could have moved to a different neighbourhood or even city to afford your preferred home.<\/p>\n

I\u2019m renewing or refinancing my mortgage. Will I be affected by the stress test?<\/h2>\n

Those who are renewing their mortgages won\u2019t 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\u2019s 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.<\/p>\n","protected":false},"excerpt":{"rendered":"

As you may have read, TD Bank recently raised their prime lending rate to 2.85% \u2013 15 basis points higher than the 2.70% advertised by the other banks. It\u2019s 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 […]<\/p>\n","protected":false},"author":44,"featured_media":8030,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jnews-multi-image_gallery":[],"jnews_single_post":[],"jnews_primary_category":[],"footnotes":""},"categories":[3,172],"tags":[],"class_list":["post-8028","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-ask-the-pros","category-mortgage-news"],"yoast_head":"\nSome Banks Have Lower Mortgage Rates, Despite New Rules | Zoocasa<\/title>\n<meta name=\"description\" content=\"Some smaller lenders are advertising lower mortgage rates despite recent mortgage rules and rate hikes from the Big Banks.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, 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