Recent trends in the Canadian lending market have led to an increase in mortgage rates. It’s a strange market, but how so? First of all, standard interest rates do not change according to the borrower’s down payment. Lenders make no distinction between big city and small town borrowers and all the major banks in the country post the same interest rates and practically increase and decrease them in unison. Therefore, Canada’s lending market may seem quite egalitarian to the uninitiated, but that couldn’t be further from the truth.
The reason why lenders increase mortgage rates at the same time is that none of them wants to offer the lowest rates in the market. If a bank is offering the lowest rates in town, it is definitely going to have lots of clients calling. This could be a good thing, but only for a short while. Eventually, service levels will dwindle, and business will suffer. Therefore, when the big players increase their rates, smaller industry players have no choice but to follow suit or risk going out of business. What this means is high rates for the average Canadian mortgage shopper. But if you understand the market, there are a few tips and tricks you could use to bring down the soaring interest rates. Take a look:
Banks tend to offer lower interest rates to informed borrowers. When you shop around and talk to as many lenders as you can, you have better chances of scoring a favorable deal. You will gain a lot of insight on how the market operates which you will use to your advantage in the negotiation process. The more time you spend shopping around, the higher the likelihood of getting discounted rates. More affluent buyers get higher rates on their mortgages since most of them don’t get to do a lot of shopping.
Don’t Buy All Your Products from the Same Bank
When it comes to shopping for mortgages, blind loyalty is not your friend. Don’t settle for the first offer your bank gives you. Do not think that the bank will offer a discounted price because you have been working with it for a long time. Your loyalty, in such cases, will work against you. In the eyes of the lender (your bank), you are a less price sensitive customer especially if you have more than one product with the bank.
Use a Broker
Negotiating a larger discount can reduce the commissions earned by bank employees since it can be costly to the bank. Therefore, if you choose to negotiate by yourself, the bank mortgage specialist will give you a higher rate. Using an independent broker can get you better mortgage rates as opposed to going solo. More information can be found at WFCU, providing you with additional resources and references.