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A reader asked this on one of our message boards this week:
A reader asked this on one of our message boards this week:“I don’t understand why every site doesn’t have a refinance selector. How are you supposed to find a rate for a refinance otherwise?”
Heck of a good question.
After all, there are only three reasons you get a mortgage:
- to purchase a property (20% of borrowers get a mortgage for this reason)
- to renew at maturity (62%…)
- to refinance (18%…) ¹
You’d think that all rate sites would want to make it easy to find rates that apply to refinances.
Nope.
There’s one well-known rate site currently displaying 2.39% as its lowest 5-year fixed rate. This rate doesn’t apply to refinances, or to a host of other mortgage types for that matter. But you’d never know it because it’s not disclosed.
Folks who need to refinance thus waste their time chasing low rates, with no hope of qualifying for them.
Now, why would anyone use a website that leaves out essential information and wastes their precious time?
Two reasons:
a) they don’t know any better
b) the offending rate sites rank high on Google for mortgage search terms like “best mortgage rates.”
But here’s the more important question: Why aren’t other sites disclosing such basic qualification criteria as “applies to refinances?” These sites have been around for years, so they’ve had plenty of opportunity. All it would take is a simple note in their rate details.
But here’s the more important question: Why aren’t other sites disclosing such basic qualification criteria as “applies to refinances?” These sites have been around for years, so they’ve had plenty of opportunity. All it would take is a simple note in their rate details.The truth is, the biggest rate sites make millions selling mortgage leads and, in some cases, selling mortgages too. The fewer conditions they display with their rates, the more people contact them and the more lead revenue they generate.
Granted, it’s impossible to list every condition that might apply to a given rate. But in today’s market, the best refinance rates are now much higher than the best purchase rates. There’s no excuse in 2017 for a mortgage comparison website to not let users compare rates specific to refinances. We’ve done it. With a little effort, any rate site can do it.
Mind you, our rate listings aren’t perfect either. It’s hard to get some brokers and lenders to make complete and proper disclosures with their rates. But we’re trying. The Spy’s next mission is to create a filter for low-ratio rates that apply to switches. Stay tuned for that.
There are so many ways Canadians get misled by rate sites. Ask yourself why other top sites don’t show Canada’s best 5-year refinance rate, which comes from HSBC. (Hint: It has to do with what HSBC pays them, or doesn’t pay them.) It’s time all the chicanery ended. All of us in this business have an obligation to improve rate transparency. Anything less is a slap in the face to consumers.
¹ Source: CMHC
3 Comments
Rob, as someone who works in the mortgage broker business, shouldn’t the transparency start there? I’ve never seen a mortgage broker disclose the commission they make on a traditional deal (I believe it is around 1% of a 5yr fixed without a rate by-down). On private deals lender/broker fees are disclosed, so why not on a standard bank deal?
Ralph — Brokers and lenders should fully disclose all key restrictions when advertising rates. But the reality is, many don’t.
Regarding compensation, you’ll find a lot of brokers more than willing to tell you what they get paid if you ask. And yes, it’s roughly 1.00% of the mortgage amount on a 5-year term with no buydown. I’d submit that if a broker isn’t upfront on their compensation, that folks find another broker.
And let’s not just pick on brokers here. Try asking a banker what they get paid to sell a mortgage and see what kind of answer you get. The truth is, the compensation for most bank mortgage specialists is obscure, and tied to the rate they sell. The higher the rate, the greater their compensation (kind of like brokers, except that bankers have different base commissions and buydown formulas).
MOrtgage shopper here.. looking to do some preliminary research before getting a preapproval.
Have to say I’ve been most impressed with the rates I’ve found on your site compared to some of the other rate sites. You guys consistently have the lowest rates, and you can be sure I’ll be using that as leverage if I do stick with my back.