Canadian Govt doesn’t want you to find the lowest mortgage rate.

Yesterday, we saw our Federal Minister of Finance, Jim Flaherty, admit to having his office phone up Manulife Financial and ask them to stop advertising their 2.89% 5 year fixed rate mortgage special.  An unprecedented move for a government official…  Yes, it’s true!  But wait, it gets better (or worse).  Flaherty admitted to calling up BMO personally,  to ask them to stop advertising their 2.99% 5 year fixed rate (NO FRILLS mortgage).  click here for the article.

Now, just a comment about these products and rates…. if you are a regular visitor to CanadaMortgageNews.ca then you’ll know the BMO low-rate (or NO FRILLS to be more accurate) is a terrible product with too many restrictions and limitations…  Manulife has a decent product….rate is competitive, however, like most other Bank’s, there is some mystery about what their best rates really are…  so once again, you can’t rely on a website or bank advertising when it comes to finding the best mortgage…a mortgage broker is the best way to get unbiased advice with access to dozens of Lenders.

Back to the topic at hand… Flaherty said they are concerned that these record low rates could motivate Canadians to take on more debt than they can handle… Of course, this concern is unfounded.. yes, that’s right unfounded… For years, the govt has been telling us Canadians are taking on too much debt… and yet they couldn’t really back up those claims… Last month, I reported that Canadians were paying their debts off faster and with less defaults…  Hey, maybe we Canadians are smarter with our money than Flaherty is giving us credit for?

A BETTER SOLUTION FOR FLAHERTY’S CONCERNS

If the govt is so concerned about Canadians borrowing too much, then why not make this simple change… why not set a higher rate of interest for qualifying?  We already have to qualify at the BIG SIX BANK posted 5 yr fixed rate when choosing a mortgage with a term shorter than 5 years or when choosing a Variable rate… Why not just make all mortgages qualify at 5.14%? … and cap this qualifying rate at 7.00%?   Surely, this would ensure that borrowers are able to absorb future rate increases?

REDIRECT YOUR ATTENTION MR. FLAHERTY

How about directing your energy on things that are costing Canadians $$thousands…?  Prepayment mortgage penalty calculations have been inflated by the BIG SIX BANKS for around 13 years… Penalties of $10k, $20k, $30k and even higher… Flaherty said he would standardize mortgage penalties 3 years ago... but he never did… and the only change he made was to force Banks to create an online penalty calculator, advertise a 1 800# and spell out in plain language how the penalty is calculated (the plain language hasn’t happened yet but the first 2 have and it’s a great way to expose how unfair the BIG SIX BANK’s penalty calculations truly are)….

Flaherty has made numerous mortgage rule changes that have made getting a mortgage much more difficult….  it is estimated that between 5% and 7% fewer Canadians are not able to get a mortgage today compared with 2008.

Canadians have around $1.5trillion in personal debt…  $1trillion of that is mortgages, the rest is credit cards, personal and car loans and unsecured lines of credit… Why not impose some rules for the unsecured debts?   You know, those credit cards, car loans, etc?   Those higher interest rate debts….!!    Wouldn’t that make more sense?

BOTTOM LINE

Cost of funds are low… the mortgage market has shrunk thanks to the tougher mortgage lending rules… so competition is forcing Lenders to sharpen their pencils and offer better deals… Let’s embrace the lower cost to Canadians, and not fear it… I’d rather put a few extra $$hundred in my pocket each month vs the Bank’s pocket…  Come on Flaherty, there are better ways to protect Canadians if that’s what you’re really trying to do.   By the way Mr. Flaherty, you’ve given more attention and advertising to Manulife and BMO then they could have ever dreamed of…I hope they send you some thanks…    And finally, there are better mortgage deals out there…so don’t get fooled by these rates….call a mortgage broker for access to dozens of great unadvertised rates and mortgage products.

As always, I welcome your comments and questions.

Looking out for your best interest….

Steve Garganis 416 224 0114 steve@mortgagenow.ca