Tuesday, May 13, 2014

Investors Group shakes up Canadian R/E market announcing the 1.99% Mortgage

Are these the effects of the Bank of Canada's recent declaration that low interest rates are here to stay?

Today Investors Group unveiled a 3-year mortgage at 1.99%, a move sure to reverberate through the real estate industry:
The Winnipeg-based financial services firm posted the rate on its website Tuesday, offering a 36-month term at a variable rate 101 basis points below IG's current prime rate of three per cent.

"It's probably something we may see more of," Toronto mortgage broker Marcus Tzaferis said. "They offer it up so they can cross-sell their investment products."

The offer comes with strings attached — namely that you can't break the mortgage for any fee during the three-year term, unless you sell your home. But the offer does come with the ability to double up monthly payments, or pay a 15 per cent lump sum once a year.

In real dollar terms, it could knock a lot of money off a mortgage payment, at least over the short term. A standard 25-year $500,000 mortgage at a five-year rate of 2.99 per cent works out to $2,364 a month. That mortgage under IG's new terms would be $2,115 a month — savings of $249 monthly, at least for the first three years, and as long as the variable rate doesn't increase.

Tzaferis speculates the company is willing to take a loss on the home loan temporarily in the hopes of making money elsewhere down the line.

"They get the opportunity to wrap you up and cross-sell their mutual funds and you'll probably renew and pay an extra half a per cent for a five-year then," he said.

Investors Group's five-year posted rate is currently at 3.4 per cent, slightly higher than what the market-leading big banks are offering.

Tzaferis says he recalls seeing five-year variable rate mortgages below two per cent several years ago, but it's believed this is the first such posted product since the recession that began in late 2008. Kelvin Mangaroo, president of mortgage comparison website RateSupermarket.ca, says it's the lowest rates he has seen in his company's six-year history.

"I think they were trying to break the psychological barrier of two per cent to generate some interest ... ahead of the peak spring buying season," Mangaroo said.

"Rates will go up over time, but it looks like it won't be any time soon," he said.

In 2012, a number of Canadian banks offered five-year mortgage rates below three per cent — something that earned them a stern rebuke at the time from then-finance minister Jim Flaherty. The banks quickly dropped the offer.

In March, Bank of Montreal again offered a five-year rate of 2.99 per cent, a deal that Flaherty's successor Joe Oliver was much more silent about.

Oliver released a statement Tuesday following news of the rate, noting the government has moved repeatedly in recent years to tighten lending rules and keep a lid on consumer debt and the housing market, but offering no hint it has any pressing intervention plans.

"I will continue to monitor the market closely," the statement read.


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  1. Well, that's it, I give. I'm not buying but I no longer care about what happens to the housing market in this country. I have better things to think about.

  2. IT's called the Law of Unintended Consequences. The government should be quite versed in it by now, yet seems to still plead complete ignorance.

    Increased down payments and higher CMHC premiums slowing things down this Spring? Well us bakers will speed them back up with a fire sale on mortgages. Most of them, CMHC-backed mortgages!

    Your government. Idiots with golden pensions.

  3. I'm waiting for the 0.99 cent sale.

  4. Let the fools rush in !!!....too bad basic economics and personal financial planning are not grade 12 subjects in high school. I'm not looking forward what's next . Joe Oliver is probably looking for a job in EU just about now.

  5. did whisperer get offed?

  6. Time for a new post, dagnabbit.....

  7. "Credit unions take on banks in mortgage wars with rates as low as 2.69%"


  8. Where is Whisperer? We miss you.......

  9. It's been a month since the Whisperer last posted. Is this the latest sign of capitulation?

    1. Either it really is different here/this time, or the bubble will keep on going.

      I simply am choosing to opt out. Just got a decent biotech job offer a somewhat off-hub place in California. My after fundamental living expenses income, despite paying more for health insurance, will be nearly double than what it is in Vancouver.

      I hope it works out for everyone who is sticking it out here :) The cost of and supply of housing in the Lower Mainland and the divide between those who bought pre-2005 and now will be an issue that will affect the city is adverse ways for the next generation.

  10. No, the cartel took him out!

  11. The market can stay irrational longer than you can stay solvent (mentally, i suppose in this case)

  12. An article that compares the differences between the Canadian and U.S. real estate markets the special market that exists in Kitchener Waterloo, which is particularly strong. I have been hearing it all over Kitchener Waterloo: "Should I buy a home right now or should I wait?"