“There is a lot of confusion among clients between fixed and variable rates; clients are wondering what affect the drop will have on fixed rates,” Michael Marini
, a Toronto-based broker with Dominion Lending Centres
told MortgageBrokerNews.ca. “More rate shopping is going on right now as a result.”
According to Marini, many clients aren’t aware that the Bank of Canada overnight rate and fixed mortgage rates aren’t correlated, despite what friends and family may be telling them.
He’s had to explain that it is only variable rates that are affected.
“I do a virtual meeting and go through the bond yield charts and how they affect fixed rates,” Marini said.
Many brokers likely experienced an increase in the number of inquiries from current clients wondering what sort of refinance they can expect following the Bank of Canada’s decision to slash its overnight rate target to ½ per cent.
But clients may be surprised by their options.
“Clients are calling and asking if fixed rates are down; they think the Bank of Canada rate drop affects all mortgages,” Michael Tulchenetskiy of Northwood Mortgage told MortgageBrokerNews.ca. “When they call I have to explain it to them but clients are shopping around more."
“Clients are very rate-focused right now and looking to compare rates in the market.”
Still, analysts suggest there will be some knock-on effect for the bond market and yields, which should eventually influence fixed rates.
Brokers are frustrated by the increase in rate shoppers and the number of clients being given incorrect information about how the Bank of Canada rate cut affects rates.