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Tell Your Clients, If the Bank Calls, Hang Up!

Attention Canadian Mortgage Brokers!

It's time to arm your clients with the knowledge they need to navigate these turbulent times in the housing market. As reported in an article in Canadian Mortgage News, variable rates are at their highest levels in 20 years and the prime rate has jumped 4.25% in less than 12 months. But don't worry, it's not as bleak as it seems.

History has shown that every time the Bank of Canada raises their rates quickly, they’ve also lowered them quickly. A general consensus among industry experts is that rates will start falling by 2024. In fact, one major Canadian lender has even commented that they believe the bank prime rate will fall towards the end of 2023. But we’ll believe that one when we see it.

So, what does this mean for your clients?

It means that the time to act is now! One of the most popular mortgage products right now is the short-term fixed rate mortgage, and for good reason. Nobody wants to lock into a 5-year fixed rate mortgage when the general sentiment is that rates will start to come down within the next 12-18 months.

Here's where you come in trusty mortgage advisor: Many Canadians are scared, they see rates rising and they think they're going to continue to rise. This is where the big banks capitalize on their fear. They call and tell people they can lock into a "special" 5-year fixed rate mortgage to end the rising rates. But, this is where you get to say "if the bank calls, hang up".

Educate your clients to beware the 5-year fixed rate trap. Urge your clients to call you, to explore all available options, not just what the one their bank has to offer.

By the way, Broker Scout can help you find them a refinancing opportunity well before they ever get that call, even calculating the penalties so that you don’t have to!

It might make sense in the short term to lock into a rate when rates are rising, but you don't want them to be stuck with a sky-high rate in 2 years when rates are expected to fall. You know that a 5-year fixed rate mortgage will prevent them from taking advantage of these decreases, but do they?

Instead, urge them to consider a short-term fixed rate mortgage or a variable rate mortgage. As with anything else, each of your clients’ situations is different which is why it's essential for them to consult a mortgage professional like you before making any big decisions that could cost them thousands.

In short, it’s your job as their advisor to educate your clients and show them not to be afraid of the current state of the housing market. The proof is in the past, and rates will inevitably come down. Arm your clients with the knowledge they need to make informed decisions, and most importantly, call them well before their renewal date and before the bank calls them. We are Canadian after all, so it would be rude just to have them hang up on the bank, but it sure would be nice for them to say that their mortgage broker already has them covered, bye bye!!


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