MLN NewsStream

The Bank of Canada, widely known for its plot-twist-worthy decisions, went for the predictable ending this round. It left its key policy rate at a 22-year high of 5.00% - just as the bond market expected.

Compared to a 25 bps hike, today's rate pause saved an average floating-rate borrower from seeing up to a $70 increase in their monthly payment. (The average Canadian mortgage amount is $351,692, according to the latest TransUnion data.) 

WealthOne Bank of Canada is one of the most competitive near-prime lenders. So, it was concerning to hear that it's under Finance Minister Chrystia Freeland's microscope.

Her scrutiny of the company was reported by the Globe this weekend. In a nutshell, the DoF made the company jump through all sorts of hoops due to alleged concerns about national security and potential money laundering. Among other things, Freeland's office forced the bank to cut ties with three key investors with apparent links to the Chinese government.

This begs the question, is any of this relevant to mortgage borrowers and brokers?

We spoke today with WealthOne President & CEO Paul Leonard to learn more. Here's what he told us.

It's always interesting to check in with mortgage fintechs like Pine. After all, if investors like Greylock Partners, Inovia Capital and Intact Ventures value the company at $75 million and hand them $30 million, they must be doing something unique.

On Sept. 11, Pine unfurls itself nationally across Canada—everywhere but Quebec (possibly because of the nightmarish red-tape, language rules and compliance environment in the province).

The company sells an ultra-low rate and targets a younger demographic with its simple, fast process. Two out of three customers breeze through its whole application on their smartphones, the company says.

I recently spoke with Co-founder Justin Herlick, who just came off his best month ever since opening the doors in January 2022. My goal: Peek under the hood and see what's making the Pine tree grow.

We dug up four notable takeaways:

Canada's economy needs stormy weather before the sun can shine. And on Friday, we got some dark clouds.

Our economy shrunk, and joblessness surged below the border. For all anyone knows, Canada may already be in the midst of a technical recession (defined as two consecutive quarters of negative growth).

For low-rate enthusiasts, it was a glimmer of hope that the top in rates might be in. Canada's 4-year swap rate dove another 7 bps, per the chart above. And—while it's not unheard of that some banks would hike fixed rates in the next week or so—sliding swap rates make that less likely.

Following the data, the economic establishment hurried to declare that rates had hit their ceiling. But long-time readers will recall us reporting that same market sentiment last spring, and we all know how that turned out.

Here's more of the macro nitty gritty, and what to expect next...

"HSBC Canada offered market-leading rates," the Competition Bureau wrote today, with respect to RBC's bid for the company.

Observe the word "offered" — in the past tense because, barring a miracle deal blocker from the Minister of Finance, Canadians may soon never see HSBC's leading rates again.

The Competition Bureau has officially approved RBC's takeover, despite outcry from consumer advocates and overwhelming evidence of HSBC's leadership position in products like mortgages.

"HSBC Canada personnel viewed their own mortgage business as a 'rate disruptor' in the Canadian market, and pursued a strategy focused on low publicly-posted rates," the Bureau wrote in its report to the Minister of Finance.

In fact, HSBC systematically advertised Canada's lowest and most transparent uninsured mortgage rates since 2016. The Competition Bureau failed to mention that, however. Instead, it noted that RBC documents indicated that HSBC Canada "often issued below market rates" on mortgages. If ever there was an epic understatement from a Canadian law enforcement agency, that might take the cake.

MLN's latest Canadian Mortgage Rate Survey shows HSBC with Canada's lowest nationally advertised uninsured mortgage rates in the:

• 2-year term, at 6.54%
• 3-year term, at 6.29%
• 5-year term, at 5.94%
• Variable market, at 6.40%
• HELOC market, at 7.20%

HSBC can hold its head high. It has not only been Canada's most formidable national uninsured mortgage competitor for the past seven years but also its most transparent.