Predictions for Canada’s mortgage market in 2020

Globe and Mail ~ December 29th, 2019

Canada’s mortgage market turned heads in 2019. From the plunge in interest rates, to the late-year surge in mortgage growth to the growing influence of online discount mortgage lenders, it was a year of milestones.

Looking ahead, 2020 is guaranteed to have its own twists. These are five undaunted predictions of what’s to come:

A more cutthroat mortgage market

It’s taken a few decades since the birth of the internet, but lenders are finally waking up to how competitive they have to be to win online borrowers. This year saw a new level of online-mortgage competition. Spreads between typical deep-discounted five-year fixed rates and Canada’s five-year swap rate (a rough proxy of a lender’s basic funding costs) shrank to its lowest on record, as tracked by Instigating such rate battles were the likes of motusbank, HSBC and online brokers. Expect 2020 to be even more competitive as brand new, digitally focused direct-to-consumer mortgage lenders enter the market, including one or more name brands you know well.

More transparent banks

In 2019, Bank of Nova Scotia deviated from its big-bank peers by advertising, for the first time, its best mortgage rates online. Scotiabank’s eHome online mortgage application featured rates that most banks wouldn’t touch. And customers took notice, with more than 100,000 borrowers trying eHome this year. The “digital mortgage” race will only heat up in 2020. The rest of the Big Six will likely all roll out enhanced mortgage websites. Not all of them will quote highly competitive rates online, but one or two will, and that’ll be enough to drive even further rate competition in 2020.

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