While borrowing costs may still be uncomfortably high for most Canadians, anyone entering the mortgage market this summer will find a welcome silver lining: a growing diversity of lenders and brokers competing to offer the lowest interest rates and smoothest user experiences.
Over the past five years or so, tech-savvy new entrants have entered Canada's mortgage market, promising everything from ultra-low interest rates to digital-only, same-day loan approvals, and some incumbents have responded by adding more features or rethinking their business models to lower costs and speed up processing times for consumers.
That means well-qualified borrowers can find numerous lenders, brokers and comparison sites advertising similarly low interest rates, without any of the overly stringent terms — such as costly penalties and disappointing prepayment incentives — that have traditionally come with the cheapest mortgages. But the growing variety of attractive options also means comparison shopping has become more complicated, requiring scouring multiple online resources to find the best deal.
To help prospective homebuyers and homeowners up for mortgage renewal choose from the vast array of options, The Globe and Mail has reviewed five websites showcasing the most competitive mortgage products on the market today.
We asked each company to quote the lowest interest rate available through their site for two scenarios: The first was for a first-time homebuyer in Calgary, where young people are flocking to find affordable housing, on a five-year fixed mortgage that requires default insurance, which is mandatory for buyers with less than a 20 per cent down payment.
The second scenario required a minimum fixed mortgage interest rate for five years for Toronto homeowners renewing loans that were not covered by default insurance.
Here's what I discovered:
Nesting
Overview: Founded in 2018, Montreal-based Nesto is an online lending and brokerage that has been rapidly expanding into the market. Nesto mortgages can be found on the company's website and with brokerages that are part of the M3 Group network, which also includes Multi-Prêts, Mortgage Alliance, Mortgage Intelligence, etc. You can also see advertisements for Nesto mortgages on financial literacy sites such as Wowa.ca.
The company in June acquired CMLS Financial, Canada's third-largest nonbank mortgage lender. Damien Charbonneau, Nest's chief operating officer and co-founder, said the acquisition will enable the company to serve the needs of higher-risk borrowers with lower credit scores.
Lowest interest rates: As of the week of July 8, Nest said the lowest guaranteed interest rate it could offer in a Calgary buyer scenario was 4.59 per cent. In Toronto, it was 5.19 per cent in a home renewal buyer scenario.
Special feature: For applicants who have been pre-approved for a mortgage (a process in which a lender reviews a borrower's financial situation and commits to lending up to a certain amount), Nest says it can lock in the offered rate for up to 150 days, 30 days longer than the typical rate-locking period of up to 120 days.
Nesto also promises a fully digital mortgage approval process in as little as one day.
Perch
Overview: Like other online brokerages, this Toronto-based fintech startup carries a variety of loans from major banks, credit unions and non-bank lending institutions, and also has a search engine that matches users with loans they may qualify for.
Lowest interest rates: Partch said he can offer interest rates as low as 4.64 per cent for mortgages that require default insurance in Calgary, and can lower rates to 4.99 per cent for Toronto homeowners renewing uninsured mortgages.
What makes it different: The company uses a proprietary formula that includes interest rate projections to estimate the borrowing cost of each mortgage product and ranks it accordingly. While any rate projection can be wrong, it helps consumers compare mortgages with different terms and fixed- and adjustable-rate products, says founder and CEO Alex Leduc.
The company provides a basic overview of the terms and conditions of each mortgage offered, and also warns users of lenders that charge particularly steep prepayment penalties.
Pine
Overview: Founded in 2021, the lending and brokerage currently operates in every province except Quebec, where it hopes to launch within the next 12 months, according to CEO and co-founder Justin Harlick.
Lowest interest rates: Herrick said Pine can offer a 4.64 per cent interest rate for a first-time home buyer in Calgary. For Toronto homeowners, the rate is 4.89 per cent.
Featured: Pine made headlines earlier this year when it announced a partnership with Wealthsimple, an online investing platform with more than 3 million users.
Wealthsimple customers who work with Pine are eligible for cashback on their mortgage payments. For Wealthsimple customers with less than $100,000 in assets, the discount is a minimum of 0.05 percent. The difference between what borrowers would pay at their contracted rate and what they would have paid if interest rates were 0.05 percent lower is deposited into the company's cash account each month.
Clients with assets between $100,000 and just under $500,000 will receive a 0.1 percent discount, while those with assets over $500,000 will receive a 0.15 percent discount.
Wealthsimple is also offering an additional 0.05 percent off every $50,000 in new transfers to the platform as a temporary promotion.
Rate Hub
Overview: Founded in 2010, Ratehub has become a major player in the mortgage market. Best known as a financial product comparison site, the company also operates an online brokerage of the same name and in 2020 added its own in-house mortgage lender.
Lowest interest rates: Ratehub offered 4.64 per cent as the lowest interest rate for buyers in Calgary. Toronto homeowners upgrading their home had the lowest interest rates tracked by The Globe, also at 4.64 per cent.
Special feature: Ratehub offers some of its best interest rates online, including a 4.64 per cent interest rate on an uninsured mortgage renewal in Toronto in our scenario, under the enigmatic name “Canadian Lenders.” The company doesn't advertise these rates under the names of the institutions offering these mortgages, because they're only available through the company's brokers through special volume discounts or promotions, according to spokesperson Tara Bolger.
Summary: Wowa.ca describes itself as a Canadian personal finance encyclopedia, with content ranging from real estate and mortgages to investing and taxes. It is also a financial product comparison platform that introduces different lenders and brokerages. The company is compensated for leads generated by users who click on advertised rates.
Lowest interest rate: In the Calgary homebuyer scenario, Wowa.ca offered the lowest guaranteed interest rate of 4.49%. In the Toronto scenario, it was quoted at 4.99%.
Special feature: Wowa offers interest rates directly from lenders, as well as rates offered through major brokers. These rates are often very low because they include a discount, known as a buy-down, that the broker secures from the lender in exchange for a portion of their commission.