Another subtle shift in banking being driven by internet–better mortgage rates
In Canada Banks have traditionally refused to accept the mortgage broker market and advertised “special offer” interest rates that could be 1.25% over the actual market.
This practice has been changing of late, and the driver is internet. While other countries such as UK and US have rate aggregator sites, Canada has been a stubborn holdout in not having such sites. This has been driven by the banks oligopoly refusal to advertise in such sites.
Moreover, the advent of rate comparison sites are making consumers increasingly jaded towards lenders who post 3.99% when the real market is at 2.99%. You have to be either gullible or weakly qualified to pay 3.99%, and seemingly everyone knows it. Promoting inflated rates therefore hurts bank credibility and creates a needlessly adversarial mindset in consumers.
What has changed? Two shifts have occurred.
- The advent of mortgage broker consolidation into several with national presence has allowed for greater influence over lenders to produce better rates and make them more accessible, and
- The advent of powerful monoline mortgage lenders fuelled by high net worth investors and corporations with excess cash seeking interest yields that are not available in traditional bonds.
Sites such as ratebub.ca and ratesupermarket.ca are the vehicles that are finally changing the face of lending in Canada by bringing true interest rate transparency to the masses.
Disclaimer: I am active in the mortgage broker market with www.truenorthmortgage.ca