Why Mortgage Rates Vary by Province, and How You Can Level the Playing Field

Homes in and around the Greater Toronto Area may come with some hefty price tags, but if you’re property shopping in Canada’s largest housing market, you’ve got one thing working in your favour: cheaper mortgage rates versus the rest of the country. 

Ontario mortgage rates are currently as low as 2.34 percent for an insured 5-year fixed mortgage, according to RateSpy.com. 

That’s lower than in Quebec, for example, where the best insured 5-year fixed-rate (as of Oct. 23, 2019) is 2.49 percent. In B.C. and Saskatchewan, you’ll find 5-year fixed rates as low as 2.47 percent and 2.49 percent, respectively. 

What About Those Outside of Ontario?

If you’re a borrower outside of Ontario, you may be paying a material premium for a similar mortgage. Given a difference of around 15 basis points, you’re spending up to $650 more per $100,000 of mortgage over five years.

It seems unfair to have to pay more simply based on which province you’re in. But the difference isn’t so much about geographical discrimination as it is about supply and demand.

Since Ontario is such a large competitive mortgage market, borrowers there have more options to choose from in terms of financial institutions. 

From the Big Six banks, like RBC and Scotiabank, to monoline lenders like First National, MCAP and CMLS, to the more than 70 independent credit unions that operate solely in Ontario, options abound for borrowers in Canada’s most populous province. And because these lenders are all fighting for the same mortgage dollars, the market is fiercely competitive. 

Some of the lowest cost lenders, such as Meridian Credit Union and DUCA Financial, don’t lend outside of Ontario, so their often-leading rates aren’t available to customers in places like Alberta or B.C.

So What’s a Borrower Outside Of Ontario To Do?

Shop Hard

An extra 15 basis points (0.15 percentage points) isn’t the end of the world. There are still great rate deals to be had in the other provinces. Compare mortgage rates on sites like Rates.ca as a starting point. It lets you search for mortgage products from the country’s top brokers and financial institutions in seconds. And remember, while it may be tempting to stick with a lender you know (like your bank), that “comfort” could mean sacrificing some of your hard-earned money. Unless you have a tiny mortgage, it’s always worth the time to seek out better rate deals.

Learn As Much As You Can

Try to be keenly aware of any restrictions tied to the mortgage, such as a shorter-than-normal rate hold (a “quick close” mortgage), higher than normal prepayment penalties (e.g., a penalty of 2.75% of the principal or six months’ interest), or a mortgage that doesn’t allow early termination or refinances.

Talk To a Mortgage Broker

While it’s important to do your own research and rate comparisons, using a broker outsources some of the legwork to someone who knows the landscape. Brokers can provide invaluable advice (make sure to do your homework and verify what they tell you, as not all brokers are created equal). Mortgage brokers also have established relationships with lenders and can sometimes fight for a better rate. Just ensure you understand that your broker is being compensated by the lender they recommend. If you want to hold their feet to the fire, ask them if there any are better offers available besides the one they recommended, even if it might pay them less. 

Consider Refinancing

If you own a home, consider refinancing to take advantage of a better rate. Doing so can lower your payments or let you tap equity to pay down (consolidate) your higher-interest debt. If you’ve got no better place to invest spare money, you can also make extra mortgage payments. This narrows the interest cost gap between lower rates outside of your province and the rates you have access to.