Jim Flaherty needs to “stay out” of the affairs of banking, say mortgage brokers, as one channel lender throws down the gauntlet with the introduction of a 2.84 per cent rate.
“Jim Flaherty needs to stay out of banking,” says Scott Dawson, a mortgage broker with Verico, Paragon Pacific Mortgages and regular panelist on canadianmortgagehangout.tv. “We need real posted rates to better protect the client from IRDs and penalties.”
XCEED tweeted yesterday that it was dropping the advertised Simplicity mortgage to 2.84 per cent with a 90 bps commission from 2.87 per cent, applying downward pressure on posted rates and seemingly choosing to ignore the example set by Manulife earlier in the week.
Manulife had dropped its posted rate on Monday to 2.89 per cent, but subsequently reversed itself, bring that five-year fixed back to 3.09. That was only after an official from Finance Minister Jim Flaherty’s office contacted Manulife, expressing the minister’s dissatisfaction with the new rate.
Flaherty later expressed his satisfaction with Manulife’s change of heart, stressing the need for the major lenders not to fuel a springtime rate war, thereby overheating the housing market and increasing householder debt. XCEED’s new lower rate coincides with today’s federal budget.
Still lower rate offers posted on Ratehub.ca are available from The Mortgage Emporium (2.74 per cent), True North Mortgage (2.79 per cent) and Safebridge (2.84 per cent).
For Dawson, it appears that Ottawa was picking and choosing who they were targeting to chastise.
“I don’t know why they are picking on (Manulife). I mean, the rates posted by ING were 2.98 even before BMO listed at 2.99,” he told MortgageBrokerNews.ca. “But really, it isn’t the rate that is gonna kill you as a homeowner – it is the penalties from those deals signed by clients at a lower rate, then who are stung down the road by the IRD when they try to refinance or move their mortgage.”
Small Business Minister Maxime Bernier publicly criticized Flaherty yesterday, telling Parliament Hill reporters that the minister “overstepped his bounds” by having his office phone Manulife asking for the lender to return to the 3.09 rate.
Peter Aceto, CEO of ING, has spoken out several times on the government involving itself in the affairs of banks, and although surprised does understand the need for the minister to set the tone for the major lenders.
“It’s a shame that the government feels it has to get involved,” says Aceto. “You hope they get involved in the best interest of the people. I am surprised that Flaherty weighed in on this.”
Aceto does point to last year’s regulation tightening on first-time buyers and underwriting as “a good thing,” and argues that some banks have been too aggressive on rates.
“Banks are pushing the regulations to the limit,” he says. “BMO is the one who started this trend; we (ING) have chosen not to follow (BMO) for two years in a row.”
Aceto sees Flaherty acting more like a shareholder by directly confronting the banks on reducing rates, speaking up after his public dissatisfaction with plummeting rates went ignored by some.
“We now have the lowest mortgage rates in the history of this country, but a line has been crossed by posting below 2.99,” he says. “It is a fairly significant move on Flaherty’s part, but he is telling them that the government is a stakeholder in how the banks operate.”
Messages and emails to David Marcotte, VP of Risk Management and Mortgage Administration, and Director and Chairman of XCEED Ivan Wahl could not be reached for comment.