Press Release
Survey finds Canadians may not be benefiting from savings associated with rate guarantees
Many only use a quarter of the time available, limiting chance to secure best mortgage rates
March 24, 2009, TORONTO - A mortgage is one of the biggest expenses a Canadian will take on during their lifetime, yet close to half wait less than 30 days before their home's closing date to secure a rate, according to a recent Angus Reid poll. The poll, commissioned by ING DIRECT, found that 40 per cent of Canadian mortgage holders waited only 30 days or less in advance of the home's closing, while another 27 per cent waited nearly two months.
This last minute behaviour indicates that many Canadians are not taking advantage of the savings inherent in securing rate guarantees which are available as early as 90 to 120 days before a home closes. Analysis shows that those who used the full rate guarantee period of 120 days, saved 0.18 per cent on average or about a $1,800 over five years. These savings are based on a $200,000 mortgage with a 25 year amortization, five year fixed term at 6.96% (average posted five year fixed rate over last 10 years) and paid monthly.
According to Martin Beaudry, Vice President of Lending at ING DIRECT, not taking advantage of the full period available, is a missed opportunity. "Securing a rate guarantee, even before you start looking for a new home or your existing mortgage comes up for renewal, is a quick and simple way to save your money on mortgage interest payments over the long term. In fact, it's the reason we've made guaranteeing an early rate at ING DIRECT that much easier via the rate hold, which essentially allows someone to hold a great rate without having to provide the information required during a more traditional pre-approval process."
The rate hold, introduced by ING DIRECT this month, allows Canadians to quickly and simply hold a great rate for up to 120 days. For fixed rates this means protecting a low rate today against any increases that may occur over that time. For variable rates, it holds the best spread from ING DIRECT Prime, so if the spread changes and the rate increases as a result, Canadians are still protected. The service is the first of its kind in Canada.
Taking full advantage of a rate guarantee period makes financial sense for both new home buyers and those with existing mortgages. In fact, those with existing mortgages are the ones who could benefit most from a rate hold. The survey found that of the 64 per cent of Canadians whose mortgages have come up for renewal, over one quarter (27%) indicated they let their mortgage automatically renew. Not negotiating a better rate than what is offered in a renewal letter by the current lender, or looking to alternate lenders for the best rate available in the market, means Canadians could be missing out on the opportunity to get a better rate.
The survey found that Quebeckers were the worst offenders, being most likely to let their mortgages auto renew (36%) and apply for a mortgage 30 days or less before their home's closing date (52%).
About ING DIRECT
ING DIRECT is Canada's largest direct bank with over 1.6 million Clients and more than $23 billion in total assets. ING DIRECT gives the power of saving to all Canadians by offering high-value, simple products such as high interest savings accounts with no fees or service charges and low rates on mortgages. Low cost, index-based mutual funds are sold through ING DIRECT Funds Limited. ING DIRECT has been operating in Canada since 1997, and since that time Clients have earned more than $3 billion in interest. Clients can bank with ING DIRECT 24 hours a day, 7 days a week, at www.ingdirect.ca or by calling
About ING DIRECT Funds Limited
Mutual funds are offered by ING DIRECT Funds Limited, a wholly-owned subsidiary of ING Bank of Canada. ING DIRECT Funds Limited offers mutual funds across Canada except in Quebec and the Territories.
About ING DIRECT Asset Management Limited
ING DIRECT Asset Management Limited, a wholly owned subsidiary of ING DIRECT, is the manager of the ING DIRECT Streetwise Funds.
