Mortgage Rate Guarantees

Close to half of Canadian home buyers wait less than 30 days before their home’s closing date to secure a mortgage rate, according to a recent Angus Reid poll.

The poll, commissioned by ING Direct, found that 40% of Canadian mortgage holders waited only 30 days or less in advance of the home’s closing, while another 27% waited nearly two months.


According to ING Direct, this last minute behaviour indicates that many Canadians are not taking advantage of the savings inherent in securing rate guarantees which are available as early as 90 to 120 days before a home closes.

Analysis shows that those who used the full rate guarantee period of 120 days, saved 0.18% on average or about a $1,800 over five years. These savings are based on a $200,000 mortgage with a 25 year amortization, five year fixed term at 6.96% (average posted five year fixed rate over last 10 years) and paid monthly.

According to Martin Beaudry, vice president of lending at ING Direct, not taking advantage of the full period available, is a missed opportunity. “Securing a rate guarantee, even before you start looking for a new home or your existing mortgage comes up for renewal, is a quick and simple way to save your money on mortgage interest payments over the long term. In fact, it’s the reason we’ve made guaranteeing an early rate at ING Direct that much easier via the rate hold, which essentially allows someone to hold a great rate without having to provide the information required during a more traditional pre-approval process.”

The rate hold, introduced by ING Direct this month, allows home buyers to quickly and simply hold a great rate for up to 120 days. For fixed rates this means protecting a low rate today against any increases that may occur over that time. For variable rates, it holds the best spread from ING Direct Prime, so if the spread changes and the rate increases as a result, Canadians are still protected. The service is the first of its kind in Canada, ING Direct says.

Taking full advantage of a rate guarantee period makes financial sense for both new home buyers and those with existing mortgages. In fact, those with existing mortgages are the ones who could benefit most from a rate hold.

The survey found that of the 64% of Canadians whose mortgages have come up for renewal, over one quarter (27%) indicated they let their mortgage automatically renew. Not negotiating a better rate than what is offered in a renewal letter by the current lender, or looking to alternate lenders for the best rate available in the market, means Canadians could be missing out on the opportunity to get a better rate

The survey found that Quebeckers were the worst offenders, being most likely to let their mortgages auto renew (36%) and apply for a mortgage 30 days or less before their home’s closing date (52%).