The 2.99 per cent five-year fixed is back

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The rate that attracted Jim Flaherty’s scorn is back, with at least two mortgage brokers offering a 2.99 per cent five-year fixed rate mortgage.

“(The) 2.99 per cent five-year fixed rates just re-appeared,” Ron Butler of Verico Butler Mortgage told MortgageBrokerNews.ca. “Must close in 60 days; otherwise a very normal product in terms of pre-payment and penalty.”

The news comes on the heels of a number of major banks jockeying for competitive advantage by lowering their own, though none came close to falling below the three per cent mark.

At the time of publication, only Verico Butler and Advent Mortgage Services offer a five-year rate below three per cent, with Scotia Bank’s -- the best major bank rate -- sitting at 3.49 per cent, according to RateSupermarket.ca. And for his part, Butler is staying mum about the lender backing the rate.

Of course, the Bank of Montreal made headlines in 2012 with its “2.99 no-friller” that is widely considered to be the catalyst for record-low mortgage rates Canadian homebuyers have enjoyed for over a year.

It remains to be seen whether any other brokers – or big banks – will follow the lead and cut their own rates.
 
  • broker on 2014-02-03 11:59:57 AM

    The lender is Industrial Alliance.

  • Ron Butler on 2014-02-03 12:08:31 PM

    We typically do not talk about the lender but now that it is out there, yes, it is IA. NOT a No-Frills, as some may think. Just IA standard mortgage product 15/15 and standard penalty clauses.

  • KJL on 2014-02-03 12:18:48 PM

    Really - Read between the lines folks ! Is there nothing else to post in Mtge Broker News other than Mr. Butler .. You do know anyone can buy a rate down to the 2.99 !!!

  • Christopher Bisson on 2014-02-03 12:23:30 PM

    I understand that different people/companies have different revenue and profit models. I am always interested at the low cost model as I am curious how much volume per staffer is required to make it viable. One would certainly think that a high volume experience would entail a no frills experience - meaning very little time spent on the customer's long-term financial goals, and crafting a mortgage strategy that fits with those goals.

    Sometimes this is a rate play, and a matter of being there first. For example the bond-yield is down again, so 2.99% (or very close to it) is likely to be available everywhere in the next 2 weeks if it holds. Being first is likely going to get them business. Hopefully it does, and hopefully not at 20BPS.

  • Ron Butler on 2014-02-03 12:37:00 PM

    Sorry, KJL, that rate requires no buy down nor does it allow one. Chris, the rate is available to almost any broker at fair compensation

  • oliver teekah on 2014-02-03 12:42:12 PM

    I just got an offer for a triple a buyer : 2.35 percent for 5 year variable term!! (best case scenario, given past 5 years in the mortgage rate business!!!

  • oliver teekah on 2014-02-03 12:42:17 PM

    I just got an offer for a triple a buyer : 2.35 percent for 5 year variable term!! (best case scenario, given past 5 years in the mortgage rate business!!!

  • bill jones on 2014-02-03 1:22:24 PM

    Is this rate just for purchases? No switches or conventional financing? It has a "standard penalty clause" - really? I didn't think that basing the penalty on a "reinvestment rate" was standard? Seems kinda silly and unnecessary to not disclose who the lender is as it's pretty easy to figure out - no sense in playing games.

  • Ron Butler on 2014-02-03 1:30:32 PM

    Seriously, the penalty calculation thing, I mean seriously?? Every lender is different on penalty, some better, some worse, it's not fully closed or 5% so let's quit splitting hairs. Many lenders ask we do not advertise their names on the websites, so we don't, it's not a conspiracy.

  • Christopher Bisson on 2014-02-03 1:35:40 PM

    Fair compensation used to mean 100-120BPS. I am not sure what it means to you, but if it is half that range it is low margin.

    Like I said, deciding which way to go about the business model is a choice we have to make as owners.

    I wish you the best of luck.

  • Ron Butler on 2014-02-03 2:00:17 PM

    There's a "new normal" lender's are designing promo's with lower commissions as a fact of life.

  • Richard Kitts on 2014-02-03 2:02:11 PM

    Hi Ron; I hope you are extending this rate to your current signed up pipeline of approvals and moving them from the current lenders. I am sure they will be watching!! Reinvestment rate is 2.5%... ouch!!! already a 1/2% each year as a penalty..guess your client won't be going any where for a while. As long it makes sound business sense to get paid 70-90 bsp instead of 105-115 in the market, and client is happy with the 2.99% with high penalty mortgage, then all should be good. Of course the deal has to close!! What is the close ratio of a Rate Shopper?? I hope someone is tracking!! Hopefully you have enough time to show them the fixed vs variable prime -.65% you offer.. wow I,m tired just thinking of all the work you have to do for a 40bsp commission cut. My hats off to you Ron!! RK

  • client on 2014-02-03 2:09:20 PM

    All his clients will be asking for the 2.99% as the majority of his clients come from web leads and they always look for cheaper rates upto the week of closing. I know - I am one of his clients that will be demanding this new rate with Indutral Allince (whoever this is).

  • Ron Butler on 2014-02-03 2:11:51 PM

    Richard, in spite of your Superman cape, the 3.39% 5 - year on your website is not so super. The consumer will reach their own conclusion. That's what so many mortgage brokers don't get: the rates are not a secret any more and every time a mortgage broker talks about what is wrong about working for the lower commissions as we do everyday, a consumer reads the post and crosses the mortgage broker who insists on higher commissions off their list of prospective firms to contact. Oh, and Richard, thanks for pointing out we also offer one of the very best Variable Rates in Canada with only a 3 month interest penalty....guaranteed.

  • Bill Jones on 2014-02-03 2:29:29 PM

    Devil is in the details. We can agree to disagree on the importance of penalty calculations - seriously. Still don't know if it is only for high-ratio purchases?

  • Ron Butler on 2014-02-03 2:33:15 PM

    @ Bill, everything, even refinance and transfer / switches.

  • Richard Kitts on 2014-02-03 2:43:26 PM

    Hi Ron
    You know who I am and I have not posted a low rate??? Wow, it must be working!! If rate was all I was selling, my rate on my site would have already been changed last Friday when that rate was posted by I.A. By the way, consumers do like the cape and the Mortgage Freedom Fighters and we do track that. I do offer the 2.99% fixed and 2.35% on the variable to my client, however, I ensure this is what they want first before offering something they may not even qualify for.
    To the client: Give me call.. see how we can save you money besides the lowest rate..519-743-4365.. Hope to hear from you soon!
    Richard

  • Ron Butler on 2014-02-03 2:56:24 PM

    You are right Richard, everyone loves a Superman cape and all honest businessmen post a high rate on the front of their website but offer people lower rates when they call in. That is well known system. Seriously, I mean you really want to put that out there??? Seriously???

    Cheers

  • Kent Farnsworth on 2014-02-03 4:36:02 PM

    Oliver what the heck? Groundhog day? lol

  • Jimmy Kwon on 2014-02-03 9:06:49 PM

    I occasionally visit this site and like the majority of our industry no matter how you spin rate buy downs it is bad for the industry.

    However in this case the rate Ron is advertising is not a buy down and as long as the client fully understands the details of the penalty calculation fee, reinvestment fee and bonafide sale clause then I cannot see the problem. I have offered this type of product to only 2 clients in the past and I clearly outlined these features so my clients fully understood the details.

    This product is not for everyone and in fact when clients call me as they have seen this rate advertised, I explain the penalty, reinvestment fee, etc and almost all clients don't want this product.

    I don't agree with alot of what is posted on this site but that is the nature of this forum.

    My issue is with the companies that advertise buy down rates which is not the case here.

    My 2 cents

  • Agent on 2014-02-03 9:14:42 PM

    I don't think this 2.99 product has a binaries sales clause attached to it. Does anybody know this for a fact?

  • Jimmy Kwon on 2014-02-03 9:28:09 PM

    It does

  • Jimmy Kwon on 2014-02-03 9:31:45 PM

    Sorry, they may have changed the policy but I know there was previously.

  • Jimmy the broker on 2014-02-04 10:07:57 AM

    If you are sending your clients to Industrial Alliance , then you dont care about your clients much.

  • Ron Butler on 2014-02-04 10:16:17 AM

    @ Jimmy Kwon, please be aware there is no requirement for arms length sale on the 2.99% 60 Rate promotion. There is a standard greater of: 3 months interest or IRD penalty calculation with an additional declining scale of reinvestment fees starting at $500.00 in year 1 and declining to $100.00 in year 5. Frankly several of the Big 5 banks have some gimmicks built into their IRD calculations that would create higher IRD penalties than this formula. So these are the facts. A product with fair penalties, fair product features, at a very good rate. I think that this is what we are here for as brokers.

  • Ron Butler on 2014-02-04 10:25:57 AM

    @ Jimmy the Broker, always the last refuge of the broker who cannot give up the high commissions, they make unsubstantiated claims of the general "badness" of the lender and the broker offering the better rate. It's a very consistent pattern, the bad news for you is: the public is not buying it. Today's consumers do their own research and reach their own conclusions and they can see through the smokescreen of foolishness for those brokers trying to defend high commissions.

  • Christopher Bisson on 2014-02-04 11:19:09 AM

    Hi Ron,
    I think you are right to a certain extent: some clients just care about the rate.
    I have found that there are people who value our relationship with them, and the advice they get from us. In fact, we help about 400 people every year get their mortgages. Most of them are interested in the advice we give and appreciate our interest in their financial well-being.
    You can drive a K-car or a Cadillac. People can chose a discount brokerage or a full-service shop like ours. Neither is right or wrong. They just serve different people.
    Take care Ron,
    Chris

  • Ron Butler on 2014-02-04 11:47:43 AM

    Oy.............. Sorry Chris, but I have heard the Volkswagen versus Mercedes thing at least 300 times. Our Rate Site clients include medical doctors, deputy ministers and vice-presidents at Fortune 500 companies. The concept that sophisticated people never use these sites is just plain wrong. Demographically the segment of the population that wants DIY financial services trends to those earning over $125K family income.

  • Christopher Bisson on 2014-02-04 11:52:42 AM

    You misunderstand Ron. I didn't say that.
    I said someone may want to extra service, and not no-frills. It is the difference between going to the Ritz, or the Holiday Inn.
    Try to give the same courtesy given to you.
    I'm not bashing you. You have a model, and I have a different one. Just like the Ritz and the Holiday Inn do...

  • Ron Butler on 2014-02-04 12:03:31 PM

    Chris, here's the thing as it applies to courtesy and the way something is being is truly being said, the way you express it: I am always the K-Car and the Holiday Inn, you are always the Cadillac and the Ritz. I don't need to be a shrink to understand a passive-aggressive swat.

  • Jimmy Kwon on 2014-02-04 12:10:26 PM

    Hi Ron

    Thank you for the clarification and thank you for your ignorant comment "Jimmy the Broker".

    Like I said, I have only placed 2 mortgages with the lender and the 2 deals represent a very, very small percentage of my business.

    For you to make the comment "If you are sending your clients to Industrial Alliance , then you dont care about your clients much" is very weak.

    First of all these were 2 repeat clients (not shoppers) and one saw this rate advertised and the other (a friend) had a colleague who received the same rate. I explained the payout details and after going over other options both clients still wanted the product knowing their is a reinvestment fee and that the penalty is calculated differently. In the end it is the client's decision, not mine.

    I don't understand how this reflects that I don't care about my clients because I do. I am very blessed to be in such a great business and I work hard and long hours and appreciate each and every client.

    Jimmy

  • Christopher Bisson on 2014-02-04 1:46:47 PM

    WOW. You took that the wrong way.
    Best of luck Ron.

  • Deb on 2014-02-05 11:13:01 PM

    I try to service my clients with a "what would I do if this guy was my dad" attitude. And this doesn't always mean putting them with a lender with the lowest rate - it's a slippery slope to see so much focus on rate alone. The reality is, you can explain the details of the "best rate out there" mortgage, but when something goes awry with a client needing to pay out the mortgage early, clients can forget the fine print.

    With now over 18 years as a mortgage agent, I know that paying .1% more on a mortgage might be a fair trade-off for many of my clients, with solid customer service, and a lender able to provide wrap-around services.

    Yes, the big banks make a ton of profit, and on certain days I could shake my fist at them; but, I also appreciate that they are in my arsenal of mortgage options for my clients. It's good to have the choice.

    Great comments out there, thanks for sharing your thoughts!

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