Borrowing costs may still be uncomfortably high for most Canadians, but anyone venturing into the mortgage market this summer will find a welcome silver lining: a growing variety of lenders and brokers vying to offer the lowest rates and the slickest user experience.
Over the past five years or so, a slew of tech-savvy new players has entered Canada’s mortgage market, promising everything from ultralow rates to one-day, digital-only mortgage approvals. And some incumbents have responded in kind, adding more features or rejigging their business model to lower costs and speed up processing times for consumers.
This means well-qualified borrowers can find scores of lenders, brokers and financial-product comparison sites advertising similarly low rates without any of the overly restrictive conditions – such as high penalties and disappointing prepayment privileges – that have been traditionally associated with the cheapest mortgages. But the variety of compelling options also means comparison shopping has become more complicated, warranting the perusal of several online resources to find the best deal.
To help prospective homebuyers and homeowners with upcoming mortgage renewals navigate the sea of choices, The Globe and Mail reviewed five of the websites promoting some of the most competitive mortgage offerings on the current market.
We asked each company to provide the lowest rate available through their site in two scenarios. The first was a first-time homebuyer in Calgary – where young people are flocking in search of affordable housing – for a five-year fixed mortgage that requires default insurance, which is mandatory for buyers with a down payment of less than 20 per cent.
In the second scenario, we asked for the lowest rate for a five-year fixed mortgage for a Toronto homeowner renewing a loan that doesn’t qualify for default insurance.
Here’s what we found:
Nesto
About: Founded in 2018, Montreal-based Nesto, an online lender and brokerage, has been making quick inroads into the market. You’ll find Nesto mortgages through the company’s website, and brokerages that are part of the M3 Group network, which includes Multi-Prêts, Mortgage Alliance and Mortgage Intelligence, among others. You’ll also see Nesto mortgages advertised on financial-literacy sites such as Wowa.ca.
In June, the company bought CMLS Financial, Canada’s third-largest non-bank mortgage lender, a move Damien Charbonneau, Nesto’s chief operating officer and co-founder, said will help it cater to borrowers with lower credit scores and riskier profiles.
Lowest rates: As of the week of July 8, Nesto said the lowest insured rate it could offer in the Calgary buyer scenario was 4.59 per cent. In the Toronto renewing homebuyer scenario, it was 5.19 per cent.
Special features: For applicants with a mortgage preapproval – the process in which a lender vets a borrower’s finances and commits to loan up to a set amount of money – Nesto says it can lock in a quoted rate for up to 150 days. That’s 30 days longer than the typical rate hold of up to 120 days.
Nesto also promises an all-digital mortgage approval process in as little as one day.
Perch
About: Like other online brokerages, this Toronto-based fintech startup features a wide variety of loans from some of the big banks, credit unions and non-bank lenders, along with a search engine that matches users with the loans they’ll likely qualify for.
Lowest rates: Perch said it could offer 4.64 per cent for a mortgage requiring default insurance in Calgary and could get down to 4.99 per cent for a Toronto homeowner renewing an uninsured mortgage.
Special features: The company uses its own formula that includes an interest-rate forecast to estimate the cost of borrowing for each mortgage product and to rank them accordingly. While any rate forecast can be wrong, this helps consumers to compare mortgages with different terms, as well as fixed-rate and variable-rate products, said founder and chief executive officer Alex Leduc.
Aside from providing a basic overview of the terms and conditions of each mortgage it displays, the company also warns users about lenders that charge particularly steep prepayment penalties.
Pine
About: Founded in 2021, this lender and broker is now doing business in every province except Quebec, where it hopes to launch within the next 12 months, according to CEO and co-founder Justin Herlick.
Lowest rates: For the hypothetical Calgary first-time homebuyer, Mr. Herlick said Pine could offer 4.64 per cent; for the Toronto homeowner, 4.89 per cent.
Special features: Pine turned heads earlier this year when it announced a partnership with online investing platform Wealthsimple, which counts more than three million users.
Wealthsimple clients who do business with Pine are eligible for a cash rebate based on the amount of their mortgage payment. At a minimum, the discount amounts to 0.05 per cent for those with less than $100,000 in assets at Wealthsimple. The difference between what the borrower pays at their contract rate and what they would pay if their rate was 0.05 per cent lower is deposited in their cash account at the company every month.
Clients with assets from $100,000 to just under $500,000 get a 0.1-per-cent discount, while those with at least half a million dollars in assets save 0.15 per cent.
Wealthsimple also offers an extra 0.05-per-cent rebate for every $50,000 in new transfers to its platform as a temporary promotion.
Ratehub.ca
About: Founded in 2010, Ratehub has become a major player in the residential mortgage market. The company, best known as a financial-products comparison site, runs an online brokerage by the same name and added its own in-house mortgage lender in 2020.
Lowest rates: Ratehub quoted 4.64 per cent as its lowest rate for the Calgary buyer. Its rate for the renewing Toronto homeowner was the lowest among those reviewed by The Globe, also at 4.64 per cent.
Special features: Online, Ratehub presents some of its best rates – including the 4.64-per-cent rate for the uninsured mortgage renewal in Toronto of our scenario – under the cryptic moniker “Canadian lender.” The company doesn’t advertise those mortgages under the name of the institutions offering them because the rates are only available through its brokerage via a special volume discount or promotion, according to spokesperson Tara Bolger.
Wowa.ca
About: Wowa.ca bills itself as Canada’s personal finance encyclopedia, with content ranging from real estate and mortgages to investing and taxes. It is also a financial-products comparison platform that features a vast array of lenders and brokerages. The company gets paid for leads it generates from users who click on its advertised rates.
Lowest rates: For the Calgary homebuyer scenario, Wowa.ca presented the lowest insured rate, at 4.49 per cent. For the Toronto scenario, it quoted 4.99 per cent.
Special features: Wowa features rates offered not only directly by lenders but also through large-volume brokerages. Those rates are often very low because they involve what’s known as a buy-down: a discount secured by a broker from a lender in exchange for some of their commission.
