Mortgage wars, 2016 edition

It’s that time of year again, with one niche lender offering bargain basement mortgage rates – but just how many clients are suited to this unique offer?

Meridian Credit Union is offering a one-year 1.69% fixed mortgage rate – which might be the lowest fixed rate currently on offer in Ontario.

And which clients would be the biggest beneficiaries?

“Definitely not first-time buyers, who would likely have to qualify for a five-year fixed rate,” Drew Donaldson, executive vice president and broker with Verico Safebridge Financial, told MortgageBrokerNews.ca. “I could see an investor-type buyer who doesn’t mind taking the risk year-to-year being drawn to this product.”

Clients must visit a Meridian branch to qualify, since the product isn’t being offered through the broker channel.

Meridian announced the product on Tuesday, noting a strategy that is currently going against the trend of rising fixed interest rates.

"As a Member-owned financial institution, we are able to take advantage of the current bond and lending environment and pass those savings onto our Members," Bill Whyte, chief member services officer for Meridian, said in a release. 

The product has already earned coverage in the mainstream media and has likely piqued the interest of homebuyers. Some of whom may be a good fit for the product.

“We can complain about these offers all day but there are still clients that this rate will suit,” Donaldson said, saying he estimates the product would be the perfect option for about 5% of buyers. “Clients have to ask the right questions about it, though, such as what the penalties are.”

Those penalties, according to a Meridian representative, are fairly standard.

“If a member wanted to break out of this mortgage, Meridian’s standard penalty calculation would apply,” Diane Medeiros, manager of media and stakeholder relations, told MortgageBrokerNews.ca in an email. “Both collateral and standard charge mortgages are eligible.”

It seems each year, just before spring, one lender kicks off the season with a super-low interest rate offer. The mainstream media responds, kicking up a fuss and – much to the chagrin of many brokers – bringing the mortgage conversation back to rate.

Meridian has made headlines before for its promotional rate offerings.

Just this past October, the Ontario-based credit union offered a five-year closed variable rate mortgage for 1.85%. And last April, it offered an 18-month fixed-rate mortgage for 1.49%.