It happened! Canada is now home to a sub-1% mortgage rate!
It’s the kind of absurdly low number that have most us drooling, but is this new product worth the hype?
Let’s have a look at the details first.
Mortgages eligible for the 0.99% rate, are high-ratio. This means, a down payment of less than 20%, which will inevitably be followed by the added cost of mortgage insurance. Insurance premiums offered by CMHC currently range between 2.8% and 4% for high-ratio mortgages.
The rate is variable and based on the fluctuation of HSBC’s own Prime Rate. Borrowers enticed by the initial savings, could find themselves paying more over the term of the loan, especially if Canada’s economic- rebound from COVID-19, is hastened by the roll-out of an effective vaccine and the Bank of Canada feels secure in raising its overnight rate.
Most experts however do not expect the Prime rate to make any sudden moves and feels that many consumers may opt for fixed payment options to lock-in some peace of mind, at a time of unprecedented uncertainty.
The timing of HSBC’s product launch is intriguing, coming as it does at a point that may be both the tail-end of a historic real estate boom and the beginning of the worst stretch of COVID-19 infections Canada will see.
HSBC’s headline-grabbing move has some in the industry wondering if the bank may be rethinking its decade-long abandonment of the broker channel.