While most Canadians have no qualms about negotiating a better phone or cable rate and will drive for kilometres to find the lowest gasoline prices (ironic as that is) many are hesitant to haggle with their lenders for a better mortgage rate. Canadian Mortgage Trends (CMT) reports a recent survey from Mortgage Professionals Canada (MPC) found 41% of borrowers accepted the initial rate offered by their lender, up from 37% two years ago. Additionally, a mere 8% said they “significantly” negotiated their rate at renewal, down by half since 2021, when 16% haggled aggressively. “You’d assume that people would be shopping more than ever in the face of ‘renewal shock,’” Robert Jennings of St. John’s Newfoundland-based East Coast Mortgage Broker told CMT, adding the MPC survey is frustrating to read in light of how much could be saved by working with a broker or shopping around for a better deal. He suggests many Canadians may not know rates can be negotiated, and banks are being more aggressive and reaching out to clients earlier to lock them in at above market rates, per CMT. “Some bankers would even go as far as saying, ‘hey, here’s your renewal offer, if you find a better rate, tell me and I’ll try and match it,’” Jennings says. “How unethical is that? You’re telling somebody, ‘Hey, you probably can’t afford this, but we’re going to give it to you anyway and we’re not going to give you our best rate unless you can go find a better rate.’” Like phone, internet and cable suppliers, he says most lenders save their best deals for new customers, meaning that there’s usually a better deal to be had elsewhere. “If you know that going into your renewal, you should have the mindset of ‘I’m going to actually change my mortgage,’ as opposed to, ‘I want to stay with my bank,’” he says. “You should be offended by the interest rates that they offer.” While mortgage rates are falling, which could help ease the payment shock expected for an estimated 2.2 million mortgages that will be renewing at higher rates in the next two years, borrowers need to fight for a great rate at renewal, says Ron Butler of Butler Mortgages. Butler cautions just because lower rates are available doesn’t mean all lenders will offer equally low rates in their renewal letters. “If you’ve got a renewal coming up, they’re sending you a letter now that’s got a kind of high rate, so you’ve got to fight back and argue that rates are coming back down,” he told CMT. “They don’t just hand out their best rates. You’ve got to do your research.” Butler says borrowers should do their due diligence by shopping around rate comparison websites to see what rates are available, adding the knowledge gained will better equip their skills when negotiating with their lenders, regardless of whether or not they intend to switch lenders. There is a caveat for some borrowers that could impede or prevent them from seeking a new lender at a better rate, which is, they’re stuck with their existing lender thanks to the mortgage stress test, and their lender knows it. “The Office of the Superintendent of Financial Institutions (OSFI) applies the mortgage stress test to uninsured borrowers when switching lenders,” reports CMT. “This forces them to re-qualify at an interest rate priced two percentage points above their contract rate, or 5.25%, whichever is higher, limiting their options and reducing their negotiating power, especially if their financial situation has deteriorated.”
