Have interest rates bottomed out?
June 3 2009 by Ellen Roseman
Some banks are raising their fixed five-year mortgage rates, the Star reports today, citing higher long-term bond yields as the reason.
This may be a good time to lock in a historically low rate, assuming you can get out of an existing mortgage without a big penalty.
“The good news is that we’re still just 0.2 per cent above the lowest fixed rates in history,” said the Canadian Mortgage Trends blog, which called the turning point a couple of weeks ago and confirmed it this week.
“Moreover, if you want to lock in near the bottom, there are still some lenders who haven’t raised yet.”
Last weekend, I also got a warning from the Canadian Mortgage Rate Search Engine.
“Big fan of your mortgage articles. We just noticed that rates are slowly starting to climb up and we believe that it is important for your readers to know. We contacted major banks and confirmed the possibility of rate hike next week.”
I’m still getting complaints about unexpectedly large penalties, but I’m also hearing from people who refinanced without pain and saved money. It’s worth exploring if your mortgage will be coming due in the next year to 18 months and you fear that rates will be back above 5 per cent for five years.
Since I can’t handle all the complaints I get, I was interested to hear from someone who’s doing it as a fee-for-service business. Jane Steele Moore of Complaints Are Us in Toronto charges $50 for the first hour and $25 an hour after that.
The story of how she helped someone resolve a problem with overdraft protection at a big bank is posted below.
Jane Steele Moore
Jun 3 2009
My customer had an overdraft that was transferred to a loan (without notice to her).
This happens when the branches have overdrafts — there is a transfer of funds between internal general ledgers and it appears as a loan. Internal processing that does not bode well for customers.
Next, she received a notice that her ‘loan’ with different rates was in arrears and going to a collection agency. This all happened in a short period of time, around 60 days.
She went into the branch and discussed her ‘overdraft’ and was told that ‘overdraft’ does not impact your credit rating.
This is NOT true. In fact, her loan was sent to a collection agency and her rating changed terribly.
The only time she found about the credit rating change was when she recently went to secure a mortgage and that’s when she contacted me.
She also had paid off her loan before the ‘collection agency’ notice was mailed to her.
I had her call CIBC and follow the proper protocol, but she was told in no uncertain terms that ’she was probably terribly mistaken’ as the branch does not make statements or errors!!! Needless to say, she was upset.
I contacted CEO Gerry McCaughey’s office and ended up hearing from a Director of Service, who turned out to be helpful.
My client’s credit rating was reversed (or will be soon). The service rep still argued that ’section x, item y’ in the multi-page overdraft agreement spells out the process. This is so typical of the banks… and not acceptable.
He had to accept that my client paid her ‘loan/overdraft’ prior to a letter being sent to her by the collection agency.
Better yet, he explained that it is NOT cost effective for the bank to call customers with an overdraft of less than $500. Instead, they pay to send them to collections and ruin their credit rating!
The banks must receive a good rate from the collection agencies, as it appears to cost less than calling your customers on a ’service’ they paid for.
In the end, my client is happy and — without wanting to be — more informed about ‘overdraft’ protection.
Overdraft protection is not what people think and the banks need to use simple language and make calls to customers when things like this happen.
Auto dialers are used for everything else, so why not for calling customers who might otherwise end up with poor credit ratings — not to mention being really dissatisfied with the service?
The banks all take a different approach to overdraft protection and that is even more confusing.
Ellen, I know there are many more complaints about this out there. Not sure what more each of us can do, but I hope the banks take notice.
AM
Jun 3 2009
Our mortgage is up for renewal this year and we dealt successfully with a mortgage broker 5 years ago to get a reasonable 5 year fixed rate with BMO.
This same broker has given us a good quote with ING. But my husband went to the BMO branch across the street from his work (how old-fashioned! meeting in person) and got a quote that was slightly better IF we:
- got an RSP with them
- got a home equity line of credit with them
- and opened a chequing account with them
- not to mention that the home equity line of credit will incur about $500 of notary fees on our part.
My question is: how do we evaluate whether this is a good idea? I *hate* being forced to put all our eggs in one basket for a difference of a tenth of a point.
On the other hand, my husband likes that he can zip across the street to talk to someone in BMO, instead of internet or phone help via ING.
Thanking you in advance for your help as I do my research on this one…I don’t think I am the only one out there having to wade through all these pressure tactics.
LH
Jun 3 2009
I signed a condo purchase agreement last July. I fully expected to pay some fees relating to the closure of one mortgage and beginning of a new one, but had a shock when the bank indicated it could be $10,000 or more. (My mortgage was only $145,000.)
What I also did not expect was that the new condo townhouse interim occupancy would be pushed out by two months and the final closing pushed out from early 2010 to April or May 2010.
This resulted in the bank telling me that when I closed the sale on the first property, I would be liable for about a $10,000 IRD on the existing mortgage, since the time lapse between the two transactions would be more than six months.
And this is only approximate — who knows what the final figure will be and where I will get the money to pay for this lapse of notice?
Since the signing of the purchase agreement, I have been finding out about a lot of extras that I did not expect.
My first purchase was a Daniels First Home, which was much easier to deal with. They were forthcoming on the fees, my lawyer had no problems with them and even the bank came through with mostly accurate charges.
The units were built and ready to move into, therefore no interim occupancy fee, and registration of the condo was done in a very timely fashion. Certainly not the case now with the new builder.
If I had known more and if the vendor’s sales staff and bank were obligated to practice “Full Disclosure,” I may have dealt with this whole situation differently.
In my business, travel, we as counsellors are obligated by law to operate in a Full Disclosure mode — by making our clients aware of the total price of all components of their purchase, advising them of all the cancellation and change penalties, terms and conditions of sale, giving complete details and brochures on the product sold, as well as informing our clients of entry requirements, passports, visas and conditions in other countries involved in the sale of travel BEFORE the purchase, NOT AFTER.
Why are builders and banks not likewise obligated on purchases for much higher amounts of money?
Tejas
Jun 3 2009
to AM @ June 3 , 2009
Don’t get pressurized by BMO to get all these other services with them.
Remember all the BMO chequing accounts have a monthly fee unless you keep a minimum balance . They also charge for cheque books etc.
Also the BMO RRSP account (self directed) at BMO InvestorLine has an annual administration fee for RRSPs of $100. If your RRSP plan value is over $15,000, then there is no fee.
MW
Jun 4 2009
I have a success story about getting a partial refund from TD Canada Trust on a mortgage penalty.
We got $1,500 back, but it was a struggle.
I think banks have to fix this issue so they are better positioned in the consumer’s eye. In my view, the information was not forthcoming about how everything was being calculated and that really made my blood boil.
If you’re fighting such a case, the most important thing is to keep records of everything you get from the bank.
Although I got my money today, if I didn’t have the piece of paper they gave me, it might have been harder. But I wasn’t giving up, that’s for sure.
Here’s what I wrote to the TD ombudsman and the OBSI:
On April 24, we moved into a new home. Mortgage rates had dropped significantly, so we did our homework and went to the bank to find out what the penalty for discharging our mortgage would be.
This was on Feb. 21 and our closing was two months later. When we were at the branch, our contact gave us a printout of the penalty based on our closing date. It was $3,036, which we could live with.
We were told that since we only had one year left on our mortgage, the chance an IRD penalty would be slim.
The closing papers from our lawyer on April 24 showed the penalty was $4,583, significantly higher than we planned.
When reviewing the paperwork, I noticed the penalty used was IRD. Nowhere on TD’s Mortgage Discharge/Transfer Statement did it tell us what rate was used to calculate the penalty.
If this practice is aboveboard, shouldn’t that information be clearly stated on the discharge paperwork? As TD likes to state, it is a contract which both parties agreed to.
To find out what rate was used, you have to call the branch and hope the person you talk to might know. They didn’t in my case and had to call head office. To me, that’s not appropriate.
When I talked to my branch manager, she didn’t even know how to explain IRD. No, I am not making this up. A branch manager not knowing a mortgage term is unbelievable.
It seems banks are taking advantage of people, playing with interest rates to maximize the differential. As in my case, they used the one-year rate, whch is the closest term to my balance of my mortgage.
The one-year rate posted by TD when I was closing was 4.2%, which they conveniently discounted by 1.25%. They’re telling me that was the discount on my original mortgage.
My five-year mortgage had an interest rate of 4.8%. As you can see, the spread is now wider with the discounted IRD rate of 2.95%.
One of my biggest beefs is that you are not comparing apples to apples in regards to interest rates. A one-year fixed rate wouldn’t get the same discount as a 5-year fixed rate, because typical one-year rates are lower.
We Canadians need to start pushing our government for tighter regulations on banks and more upfront disclosure on how things work if you want out of mortgages.
I have been chasing a resolution for this since April 24 and only received a letter in the mail on June 2, saying my claim was being denied.
Yet when you call the TD customer care line, they tell you someone will call in 24-48 hours to let you know the claim is being worked on and in 7-10 days with the resolution.
I never heard from anyone until I called to follow up and was told a letter was in the mail. This is a very impersonal way of doing business for a company that is suppose to be customer service oriented.
I have a lot of investments and currently do all my banking at TD. I am now in the process of finding another financial institution to do business with.
My experience with TD has been a roller coaster ride. People at the branch are constantly changing and leaving people who are very inexperienced.
When we had our TD mortgage, it was incorrect. Our payments were to be made biweekly, but the first payment that came out was for a full month. It was entered wrongly in the computer.
We couldn’t get half the payment to be put back in to our account. Instead, we had to make another payment to make the mortgage come out biweekly. So in the first month of our mortgage, we made a month and a half worth of payments.
TD didn’t care it was their mistake. When people budget a certain way, it is difficult to get caught up. All they did was increase my overdraft so I could pay more interest.
I want the difference between the 3 month interest penalty and the IRD to be credited to my account.
But with my recent dealings with TD, I am very sceptical they would be willing to honour this request. They don’t care about “customer care” in any way, shape or form.
Lowest mortgage rates
Jun 9 2009
We have a new tool on our website. Since we have kept track of lowest mortgage rates daily, we’ve developed a system to show the statistics to our visitors.
However, because we are a brand new system, statistics are kept only from May 17, 2009.
http://www.ratebot.ca/chart/
Hope you find it useful.
dd
Jun 9 2009
TD raises its rates again . Rate has gone up twice now ( including this one )
http://www.thestar.com/business/article/648138