Variable Rate Mortgage Discount To Fall
“Major Mortgage Lender To Reduce
Variable Discount Rate”
The last several months have seen the variable rate mortgage lenders increasing their discount off of the prime rate in order to attract new business.
This week marks a breaking in the ranks with RBC announcing that they will start to raise their VRM rate today, with the rest of the crowd to follow.
Here is an article that provides more details on RBC’s VRM rate change… http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2011/08/rbc-signals-that-vrms-too-costly.html
This was going to happen sooner or later as the banks were working off of very thin margins in order to attract business through their variable rate products.
And with the majority of mortgage holders either staying with or moving to variable rate mortgages, the profit margins were likely shrinking while the mortgage risk was on the rise.
So what might we read into this with respect to the overall movement in interest rates?
Not very much I would think.
Interest rates for fixed mortgages are more likely to go down than up in the near term and the global financial market uncertainly overall makes it next to impossible to predict any type of interest rate move.
No, this is more of a case of a lost leader starting to get pulled back from the market.
Its also a good example of how things can change with mortgage programs over time when competitive forces are at work.
If you’re looking to secure a variable rate, then you should look at getting a rate hold which most lenders offer, ranging from 90 days to 18o days. This is not going to hold the prime rate in place for you, but it will lock in the discount off on prime, which is likely going to get reduced across the board in the coming week or so.
Rate shopping for VRM products will also likely decline if everyone follows suit in the market and makes a similar adjustment to RBC.
If you have any questions regarding Variable Rate Mortgages, or any other mortgage financing question, please give me a call and I’ll make sure you get your questions answered right away.
About the Author Joe Walsh
I'm a Toronto Mortgage Broker that arranges mortgage solutions on residential and commercial real estate property. With over 30 years of mortgage financing experience, I'm able to quickly assess your financing requirements and provide relevant solutions for your immediate consideration. Joe Walsh Google+ YouTube Channel