CAAMP crunches the rate discounting numbers

CAAMP crunches the rate discounting numbers

CAAMP crunches the rate discounting numbers CAAMP’s comprehensive quarterly report, entitled “Looking for a ‘New Normal’ in the Residential Mortgage Market”, points to just how prevalent rate discounting is across Canada.

“The average mortgage interest rate reported here (3.37%) for fixed rate mortgages is well below the typical posted (advertised) rates that have been available during the past year,” the report states. “Since the start of 2013, posted rates for five year terms have averaged 5.18 per cent. The much lower actual rates found by the survey confirm that there is a substantial amount of discounting in the mortgage market.”

Brokers are split on the topic of discounting, with many viewing such tactics as necessary to competing for ever-shrinking market share. The fact of the matter, according to CAAMP’s report, is that discounting is most likely here to stay.

“Rate discounting is a necessary evil and in a way we’re killing ourselves working hard for less,” James Harrison of Dominion Lending Centres Mortgage Village told “A big problem is online: brokers are battling one another (but) online is good because it gives clients a lot of options.”

Harrison estimates his brokerage has to buy-down 50 per cent of its rates to ensure the deal goes through.

According to CAAMP’s stats, rate discounts average 1.95 percentage points for five-year mortgage terms.

The national organization used a wide swath of examples to come to its conclusion.

“The study group includes a wide range of mortgages, including a full range of lengths of term to renewal, fixed rate versus variable rate mortgages, and the mortgages have been originated over a prolonged period,” the report states. “This results in a wide range of mortgage rates.”
  • Angela Wong-Liao - Invis Inc 2014-06-02 11:39:29 AM
    As a rule of thumb, spring market is the busiest and the most competitive, lenders are all out of their special promotional pricing to remain competitive in the market place.
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  • Brian Lambert 2014-06-02 12:18:36 PM
    You silly rabbit, you only settle for half a carrot? That's the problem with rate sites, you have to deal with tire kicks all day long. You buy down the rate and loss 50% commission. You have nothing to offer the client other than a rate buy down. I refuse to run a business that way, we work with our clients face to face and give them real time education and planning. A client has to feel that they to are getting something other than just a low rate. We all know to well that its not about the rate unless that's all you are offering. Banks can beat those buy down rates any day if they want to save their client! Stop trying to win your clients over with rate and win them with value. I have clients all the time tell me that they see lower rates on Rate Hub. They still do the business with us because I point out our value add service which is worth more than the .15% in rate.
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  • Ron Butler 2014-06-02 12:25:42 PM
    @ Brian, I mean absolutely no disrespect but are you saying you have never lost a mortgage to competitive rate discounting in your whole career?
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