Excerpt from Canadian Mortgage Trends.com

Typically a lender’s biggest fear is an informed consumer,” says mortgage planner, Peter Majthenyi. (See this Q&A with Rob Carrick)

That’s because informed consumers are more likely to make choices that are less profitable for lenders.

Going variable is one choice that’s yielding less lender profit these days. For many lenders, gross margins are currently over 20 basis points better in fixed-rate mortgages than in variables.
The big banks salivate at the thought of homeowners paying elevated 4.65% 5-year bank rates. (We’re talking discretionary fixed rates here. The banks’ publically disseminated “special offer” rate is even higher: 4.85%.)

At 4.65%, the average 5-year fixed bank mortgage is 156 basis points over the GoC bond yield (based on Thursday’s close). That’s a succulent spread for a lender. Remember: Five weeks ago, some lenders were selling mortgages at spreads of half that.
Not everyone’s biting, though.

The 2.9 percentage point gap between fixed and variable rates is wide enough to drive a truck through. Informed and well-qualified consumers are therefore comparing today’s fixed rates to prime - .50% variables—and many are taking their chances in a floating rate.


Read the full article at http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2010/04/views-on-variables.html