’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 MortgageBrokerNews.ca. “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.”