Last Updated on October 24, 2023 by Neil Sharma
A few records have been set, oddly, in this pandemic year, including for housing sales, and now Canadians have access to what’s believed to be the lowest variable-rate mortgage in the country’s history.
just rolled out a 0.99% variable rate on insured mortgages that has already, according to a couple of mortgage brokers, drawn intense interest from the public. Although the mortgage may not be suitable for investors, another low rate is available to them.
“We have mortgages that suit many of our clients’ needs. Our 0.99% rate is available for high-ratio owner-occupied properties, but for those looking for a mortgage for an investment property, we also have a low five-year variable rate at 1.39%,” Barry Gollom, HSBC’s senior vice president of products and propositions at HSBC Bank Canada, said in a note.
The penalty on variable-rate mortgages also makes HSBC’s offering that much more enticing, says , who noted that insured mortgages can’t exceed $1 million.
“A sub-1% variable-rate mortgage in Canada is pretty insane,” said the Rock Capital Investments broker. “The penalty on variables is only three months of interest, so you’re far ahead on the rate.”
However, Johanis noted that HSBC mortgages aren’t available to the mortgage broker channel, which means that potential borrowers have to secure the rate themselves, and the popularity of this new mortgage product has resulted in wait times in excess of three hours.
With rates slated to remain low through 2023, , chief operating officer of Matrix Mortgage Global, doesn’t think the 0.99% variable-rate mortgage product is wise in the long run. Moreover, she estimates that only about 10% of borrowers would qualify for it.
“The main thing now is, because we’re seeing a 0.99% variable, if you look at a fixed-rate mortage they’re as low as 1.39%, so you’re not going to outcompete the fixed rate in the long run,” said Martin. “Long-term, the banks will absolutely raise the prime lending rate as soon as the economy stabilizes. Fixed-rate mortgages are tied to the bond market, so even mortgage refinances would be better off with the 1.39%. Historically, variable-rate mortgages have outperformed fixed in the long term because the spread is larger, but not on this run, as the spread is only 1/16 of the average.”
Neil Sharma is the Editor-In-Chief of Canadian Real Estate Wealth and Real Estate Professional. As a journalist, he has covered Canada’s housing market for the Toronto Star, Toronto Sun, National Post, and other publications, specializing in everything from market trends to mortgage and investment advice. He can be reached at neil@crewmedia.ca.
