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Did 4-year mortgages lead brokers astray?

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Mortgage Broker News | 16 Apr 2012, 11:00 AM Agree 0
A Toronto broker is questioning if the industry’s wholesale shift to the four-year term last month – a defense against that extraordinary BMO offer –best served their clients.
  • Jim - Toronto Broker | 17 Apr 2012, 11:20 AM Agree 0
    When you look at the cooment as stating the best deal is the BMO 5 year at 2.99% compared to the 4 year is amazing. Being a mortgage broker\owner I saw based on othger factors of the BMO 5 year special I have always recomended the otger lenders. There is just too many restrictions that !.+ has that has made me decide to recommend other lenders to trully help my clients.
  • Vancouver Mortgage Broker | 17 Apr 2012, 11:43 AM Agree 0
    Clients were extremely happy and extremely generous with referrals as they wanted their friends to reap the rewards of the historically low rates.
  • David Larock | 17 Apr 2012, 12:08 PM Agree 0
    I respectfully disagree with Mr Naji.

    When the five-year fixed rate was offered at 3.19% and the four-year fixed rate was available at 2.99% an intelligent person could easily make the argument that giving up a year of term was worth a .20% discount. Saying that brokers “need to look at why they are in business in the first place” because they invoked a four-year promotional rate to compete with a no frills five-year rate is as silly as saying that those who didn’t tell their clients about the four-year promotions were just too lazy to adapt their stock advice.
  • Ross Taylor | 17 Apr 2012, 06:28 PM Agree 0
    I must admit it did ring hollow promoting the four year product during that period - four years is neither fish nor fowl, no matter how you slice it.

    I actually didn't do any -I agree with what Greg Williamson says in the article. I do think that a ten year rate of 3.99% was one of those rare 1 times in 10 that the ten year product makes sense.

    But mostly I sold five year fixed rate mortgages at the best rate I could; with a few shorter term deals thrown in for tactical reasons.
  • Jim T.. Advent Mortgage | 18 Apr 2012, 12:52 AM Agree 0
    I can't remember the last 5 yr or 4 yr fixed that we did. 90% of our business is the 10 yr fixed right now. A 10 yr at 3.83% is a fantastic deal right now!
  • Walter | 18 Apr 2012, 06:55 AM Agree 0
    Ten year deals are going to bite us when clients sell or look to sell and down the road when rates are normalized and these clients are faced with huge penalties. With the average mortgage lasting four years, why not anticipate and actually consider the nendfit of shorter term fixed rates. Have we all forgotten why we sold/variables that had no penalties? As well who said 5 year mortgages were best for a client? A bank who needs 5 years to make the deal profitable or the brokers who make the extra bps?
  • Robert Stanfield | 18 Apr 2012, 09:17 AM Agree 0
    When rates are at a historical low, longer terms are better for the client. When rates are higher, shorter terms are better for the client. I don't have a lot of clients taking a 10 year term, but based on the comment above, the penalty to break a 10 year term mortgage is no greater than the penalty to break a 5 year term mortgage. Or, at least with the lender I use there is no difference. It is clearly stated in their penalty clause.
  • Jim T.....Advent Mortgage | 18 Apr 2012, 11:45 AM Agree 0
    You are correct Robert. As per the Interest Act, the penalty to break a mortgage after the 5th anniversary is 3 months interest. Not that huge as you say Walter. Further, if rates do normalize and go up, then the IRD becomes negative or smaller than 3 months interest. Finally, if rates get back to 5.00% or higher in 4 years, your clients that took the low 10yr rate will thank you.
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