With or without a Central Bank move, brokers are bracing for an increase in adjustable rates offered through the broker channel after FirstLine Mortgages raised its floor by 25 basis points.
“We got notice that FirstLine had changed its five-year closed from (prime minus
0.65) to prime minus
0.40 effective Tuesday,” Michael Di Stefano, agent and co-owner of Dominion Lending Centres
BTB Mortgage Solutions in Niagara Falls, told MortgageBrokerNews.ca
. “We’re now expecting the other lenders to follow suit over the next week. Basically the spreads are too thin and there just isn’t enough profitability for lenders is what I’ve been told.”
Brokerages across the country are now anticipating that collective move following on the heels of FirstLine, which effectively lowered the maximum discount off of prime now available to brokers and their clients.
Other lenders are now sending out emails to their status brokers warning them to get their clients in before their own hammers drop.
Still, any mass buyer response may be slowed by the Central Bank decision earlier this month to hold the overnight rate steady. It means many prospective homebuyers simply weren’t anticipating any change in adjustable rates this season.
On April 12, the Bank of Canada pointed to global economic challenges, spiking oil prices and a soaring Loonie as chief reasons to hold off on a rate hike. What’s more, there was very little reason for lenders in and outside the broker channel to expect the bank to adjust the overnight before the fall. That inaction may have forced lenders to take matters into their own hands by independently adjusting their discounts in order to widen profit margins hemmed in by rock-bottom interest rates.
The associated bump-up in rates may actually accrue to the benefit of brokers, said Darick Battaglia, head of Dominion Lending Centres Bankfighter. Although FirstLine may lose out in the short term until its competitors slash their own discounts, now running at 65 to 50 basis points below prime.
“Any change in rates or products has historically encouraged those sitting on the fence to jump off into the market,” Battaglia told MortgageBrokerNews.ca.