The government introduced recent changes to mortgage qualification to create stability in the Canadian housing market. Unfortunately, the unintended consequences might have made the waters a little muddier. For the first time, it looks like Canadians weighing their mortgage options will have to be aware that not only do different lenders offer different products at different prime rates, but that the baseline for rate calculation might be different between lenders as well. Comparing apples to apples and oranges to oranges just became more difficult.

In response to these latest government changes, last week TD announced that it was raising its TD Mortgage Prime rate to 2.85 per cent. This is up from 2.70 per cent effective November 1st, 2016. Speculation was that the other major banks would follow suit. However, a week later we have no action. This is clearly TD’s pre-emptive move in anticipation of higher mortgage funding costs. And you can’t hold it against them. Banks are really good at making money, and they do that by charging interest on lending products to consumers.

These changes don’t affect customers with fixed rate mortgages. However, variable rate mortgage holders will now be paying more interest at TD than any other bank in Canada. But here is where things get complicated. Although variable rate mortgages are based on prime rates (which is now not consistent between all lenders) there is usually what is called a “component to prime.” It’s usually prime rate, plus or minus a component. At this time, most lenders are offering a discount of around a half a percentage point on their variable rate products. With a higher prime rate, TD could effectively offer a deeper discount. This would appear like they are offering the lowest rate on the market. In actual fact, they would be at a higher effective rate.

This certainly isn’t meant to be a slam against TD Bank. TD has offered some great products in the past, and will no doubt continue to do so. The main point of this article is simply:

Banks are in the business of making money. Mortgage brokers are in the business of taking care of their clients.

With all the products available on the market, how do you know which one is best for you? That’s where I come in. I am an independent mortgage professional. My obligation is to you. My job is to know the ins and outs of all the products lenders offer, so you don’t have to. So regardless of what bank is offering what prime with whatever discount, you have someone who sees through the noise, assesses your needs, and recommends a mortgage solution that is best for you.

If you have any questions, or would like to discuss your mortgage, please don’t hesitate to contact me anytime. I would love to hear from you!