Mortgage breakers ignore posted rates at their own peril
Article by Tamsin Mcmahon, The Globe and Mail, March 19, 2015
“As the housing market thaws from a cold winter, mortgage rate specials are popping up like spring flowers. But even as they compete to offer rock-bottom rates, banks have largely kept their posted mortgage rates unchanged.
Few borrowers give posted rates a second glance, since they’ll rarely be paying the actual sticker price on a mortgage.
But those posted rates aren’t just for show. They play an important – and profitable – role in the mortgage businesses of Canada’s major banks, one that many borrowers ignore at their peril when they go shopping for the lowest rates.
First, posted rates matter for borrowers seeking a variable rate mortgage. The federal government views variable rate mortgages as more risky and it has sought to limit their growth by requiring borrowers to meet the qualifying standards for the higher posted fixed rate. (For instance, posted five-year mortgages currently average 4.75 per cent, while banks are offering variable rates as low as 2.20 per cent).
Meanwhile, fixed-rate borrowers can qualify based on the actual rate they’ll be paying, which is almost always much lower than the posted rate.”
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