Manulife Bank lists two types of mortgage rates for its products. The lender publishes posted rates, which are its standard pre-discounted offers. It also provides special rates, which are discounted versions of those posted rates. These special rates are typically closer to the final rate a borrower will be offered. Borrowers are encouraged to negotiate for a lower rate even after being offered a special rate.
Posted rates are often significantly higher than the rates customers actually pay. Some industry observers believe these higher posted rates exist to make customers feel they have secured a better deal. Others suggest a higher posted rate might allow banks to impose larger penalties if a mortgage contract is broken early. Mortgage brokers can sometimes provide rates lower than those advertised directly by banks.
Manulife offers two main mortgage products. Manulife One combines a mortgage with a bank account and a line of credit, directing all deposits toward the loan balance. Manulife Select includes a high-interest chequing account and allows a single loan to be divided into segments with different interest rates and repayment schedules. The interest rates for Manulife's variable-rate products are tied to its prime rate.
Changes to the Bank of Canada's overnight rate cause an equal adjustment to Manulife's prime rate. Borrowers must choose between a fixed or variable interest rate structure. A fixed-rate mortgage locks in the interest rate for the entire term, providing payment stability. If market rates drop during that term, accessing a lower rate requires breaking the contract, which can incur costly penalties.
A variable-rate mortgage means the interest rate can change throughout the loan term. When the rate rises, a larger portion of each payment covers interest, slowing principal repayment. When it falls, more payment goes toward the principal. Historically, variable rates have been lower than fixed rates on average. Periods of high inflation can lead to rapid increases in variable rates as lenders raise their prime rates. From March 2022 to July 2023, variable mortgage rates increased by 475 basis points. A borrower with a 2.25 percent rate in early 2022 could have faced a 7 percent rate by mid-2023, illustrating the financial risk during economic uncertainty.
Experts recommend using the annual percentage rate, or APR, when comparing mortgage offers. The APR includes additional fees, giving a more complete picture of the loan's total cost. To qualify for the best rates from Manulife, borrowers should aim for a credit score of 680 or higher. Saving for a substantial down payment reduces the lender's risk and can lead to a better rate offer. Prospective borrowers should also work to lower their debt service ratios, which show how much income is used for debt payments. It is important to compare offers from multiple lenders, as Manulife may not have the most competitive rate. Customers should not hesitate to negotiate with the bank, informing them they are seeking quotes elsewhere before making a final decision.