World News – CA – Record low mortgage rates from HSBC

TORONTO – HSBC says it will offer interest rates below one percent for some mortgages, which rate the rate comparison website RateSpy. com says is a record low for Canada.

The bank is promoting a 0. 99 percent interest rate on its website for new variable term mortgages with a term of five years, with the annual percentage (APR) on a mortgage being 200. 000 USD based.

The deal is for high-rate residential mortgages, which means the buyer has a down payment of less than 20 percent of the purchase price.

prices. Ca and RateSpy editor Robert McLister says this is an important point as the low down payment means the buyer will have to pay for the default insurance as well.

« If you ask yourself, ‘Is it better or worse to cut less than or more than 20 percent?’ It’s better to cut more than 20 percent when the prices are a little worse, « says James Laird, RateHub co-founder. approx. .

« Even if that means your mortgage rates are not quite as good as the best out there. The savings are on the insurance side. « 

According to HSBC, obtaining the interest rate depends on meeting a variety of qualifications, including a loan approval, a loan period with a payback of 25 years or less, and a property that is owner-occupied.

The rate is also variable based on changes in the HSBC policy rate, which is now 1. 46 percent, so the interest rate could rise in the next few years if the economy improves and the Bank of Canada raises the interest rate.

Mortgage rates are currently low after the Bank of Canada cut its overnight rate in the wake of the COVID-19 economic downturn. The Bank of Canada overnight rate is 0. 25 percent, while the key rate is 2. 45 percent and the traditional five-year mortgage rate is 4 percent. 79 percent.

As the Government of Canada notes, the « conventional » five-year mortgage rate is the « stress test » rate to qualify for a mortgage. A stress test requires the borrower to demonstrate that they can afford payments at an interest rate that is usually higher than the actual interest rate on the mortgage contract.

However, banks often offer low interest rates, especially on less risky insured mortgages, to attract new customers, says McLister.

« HSBC is betting that these customers will buy other financial products, » says McLister. « The mortgage is a gateway into your wallet. « 

Laird notes that the Bank of Canada would only need to raise interest rates a few times before the floating rate would exceed the fixed rate. HSBC also promotes a fixed five-year interest rate of 1. 39 percent for high-rate mortgages under similar terms.

« Most people are in the process of being fixed, and they are extremely attractive too. There are many offers in and around 1. 5 percent – lower in some cases – for the five-year fixed rate which is just absurdly low, « says Laird.

All in all, given its terms, the HSBC offering is likely to appeal to the minority of borrowers, Laird says.

But McLister says it may be worth checking out guidelines set by individual banks regarding penalties for breaking mortgages, as statistics on his websites suggest that many people will withdraw after three or four years. These penalties can be « brutal, » McLister says, especially for fixed-rate mortgages, which is why it’s worth checking out the floating rate.

McLister also advises against the strategy of moving from a floating rate to a fixed rate mortgage in order to « tie in » a lower rate.

« This is one of the biggest mistakes that variable rate mortgage lenders make. It is extremely difficult to evaluate locks in time, « says McLister.

« If you are that good at timing the bond market, you should be a money manager managing billions of dollars. I can’t and have been watching prices for 13 years. « 

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Mortgage Loans, Fixed Rate Mortgage, HSBC Bank, RateSpy. com