Mortgage rates hit record low

Friday, May 30th, 2003

Buyers can lock in for five years as low as 4.75%

Michael Kane

CREDIT: Mark van Manen, Vancouver Sun Geri and Ben Karlstrom celebrate their new five-year, 4.8-per-cent mortgage. The rate is the lowest in recorded history.

Five-year mortgage rates dipped to the lowest in recorded history on Thursday, according to mortgage brokers Invis Financial.

Buyers could lock in for a five-year term as low as 4.75 per cent.

The last time the five-year rate came anywhere close to that was 1951, when Louis St. Laurent was prime minister.

Ben Karlstrom wasn’t even born then but Thursday afternoon he and his wife Geri signed on the bottom line with Scotiabank for a five-year term at 4.8 per cent.

The couple didn’t want to disclose the size of the mortgage to build their dream home at Millers Lane, near Panorama Village in Surrey, but said they were thrilled to be making what looks like an historic deal.

In fact, they were very happy with 5.5 per cent when they opened negotiations with the bank a few weeks ago. Since then rates have been falling steadily as gloomy economic news sends investors scurrying for the safety of the bond market.

According to Canada Mortgage and Housing Corporation, the blended average mortgage rate posted by the chartered banks was 6.15 per cent as of Wednesday. The last time it was that low was in July, 1956.

Back then, however, it is highly unlikely that any but the most well-heeled and well-connected borrowers could have negotiated a discount, especially if they were self-employed like Ben, 39, and Jeri, 50. He’s a music producer and she’s an Internet marketer.

Today, of course, posted rates are just an opening position and lenders are falling over themselves to offer discounts, even to the self-employed with fluctuating incomes.

Rob Regan-Pollock, a senior mortgage broker with Invis Financial in Vancouver, said the best available discounted five-year rate is 4.75 per cent from HSBC Canada — although the rate comes with the condition that the client open an account with a branch.

HSBC spokesman Ernest Yee said that although HSBC mortgage clients are required to have an investment portfolio worth at least $50,000 if they wish to negotiate lower rates, this does not apply to the 4.75 offer.

The next-best deal is 4.80 per cent from Scotiabank for buyers with a solid credit history who can meet the standard debt-to-income requirements of no more than 32 per cent of gross joint income to meet housing costs and no more than 40 per cent of gross income for all debt servicing.

Most mortgage consultants offer five-year mortgages at Scotiabank at 4.85 per cent but Regan-Pollock says Invis was able to negotiate 4.80 per cent thanks to “loyalty and volume.”

Mortgage brokers can often beat the best rates available at financial institutions because they deal in volume, reduce the lenders’ overheads and boast better customer retention. In most circumstances, the broker’s commission is paid by the lender, not the person taking out the mortgage.

Regan-Pollock notes that today’s low mortgage rates are in contrast to warnings only a few weeks ago that rates were poised to take off again.

“With mad cow disease and SARs and the stronger dollar, the economic outlook is not as rosy at it was,” he said. “People have taken refuge in the bond market and that’s what has driven these rates down so low for the time being. I think there will be a recovery at some point but certainly this a real window of opportunity for some people.”

Fixed-rate mortgages are at their lowest level for other terms as well.

For those interested in longer-term security, the 10-year fixed-rate mortgage is at an all-time low of 5.8 per cent. On the shorter end, TD Canada Trust’s best discounted rates are 4.55 per cent on a four-year term and 4.25 per cent for three years.

For borrowers with floating- rate mortgages, rates for converting to a fixed term change almost daily. On Thursday one of the best available deals was from National Bank which would allow variable-rate customers paying 4.60 per cent to convert to a five-year fixed term at 4.75 per cent.

“If you’re considering purchasing a new home or your mortgage is coming up for renewal, lock in your low rate now,” Regan-Pollock recommends.

“The wholesale cost of funds has increased slightly in recent days and we may not see current residential mortgage rates last as lenders respond to the increasing costs.”

Borrowers who get a mortgage pre-approved can hold their rate for 60 to 135 days. In the event that rates continue to fall prior to closing or the mortgage renewal, borrowers continue to benefit from the lowest rate available, just like Ben and Geri.

© Copyright  2003 Vancouver Sun

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