HSBC has come out with a variable rate mortgage at 0.99 per cent, which industry watchers believe is the first such posted offer below 1 per cent ever in Canada.
The lender announced a promotion on Friday offering the rate to high-ratio, insured mortgages only — meaning it is only for buyers with less than 20 per cent down, who will then have to pay to insure their mortgage, which protects the lender in case of default. The offer is for a five-year closed term — though the rate, of course, may vary up or down over that time, as it’s tied to the bank’s prime lending rate.
“It’s definitely eye catching,” said James Laird, co-founder of rate comparison website Ratehub.ca and president of mortgage lender CanWise Financial.
Laird says the group of buyers the bank is targeting make up only about 10 per cent of all the potential home buyers out there right now, but it’s a rate that was designed to get attention. “The marketing department had a lot to do with this promotion,” Laird said in an interview. “They like to make a splash in certain buckets and this is a great offer.”
December is not typically a busy time for the mortgage business, as cooler weather keeps buyers in hibernation until the spring. But the COVID-19 pandemic seemingly threw the usual seasonal patterns out the window this year, as the normal spring rush was delayed into the summer months and it still going strong, with record high sales continuing into the fall.
Samantha Brookes says the banks are doing whatever they can to compete for business into the end of the year. (Mortgages of Canada)
The move by HSBC is designed to drum up business while they can, Mortgages of Canada CEO Samantha Brookes said in an interview.
“The banks are being aggressive in trying to keep their numbers up,” Brookes said.
The cost of borrowing has plummeted during the pandemic, as the Bank of Canada slashed its rate to nearly zero back in March and April, and at its last rate decision in October took the unprecedented decision of telegraphing to the market that it plans to keep it there until 2023.
Variable-rate loans such as the offering from HSBC are typically tied to the central bank’s rate. That differs from fixed-rate loans, which are more influenced by what’s happening in the bond market. But right now both are at or near record lows.
While HSBC’s rate may have been designed to draw attention from anyone willing to deal with the uncertainty of a variable-rate loan, many other lenders are within a few basis points of that one per cent threshold already. Fixed-rate loans in the range of 1.5 per cent are plentiful right now, because bond yields have never been lower.
Double-edged sword
Economist Avery Shenfeld with CIBC says that while borrowers may welcome the prospect of mortgage rates hitting record low after record low, it’s important to remember that they’re coming at the cost of a weaker broader economy.
“This is a sign that the economy is still in rough shape that we need interest rates this low,” he said in an interview. “We’d be much happier to have an economy that included decent contributions from tourism, hospitality, restaurants and exports and relying less on Canadians adding to their debt burden from buying still more houses, condos, and cottages.”
While he’s concerned about the health of the economy as a whole, Shenfeld says there’s nothing inherently dangerous about mortgage rates tumbling lower and lower, because the housing market is so well regulated in Canada, with home insurance requirements and very well-capitalized lenders.
“We have stress tests in place to make sure that you can qualify for this mortgage and pay for it,” he said. To qualify — even for a record-low posted rate — the bank has to make sure a buyer could carry a mortgage at the Bank of Canada’s qualifying rate, which is currently 4.79 per cent.
“Even if interest rates are a few percent higher than they are right now, we’ve got some safety rails in place.”
Laird said that with rates so low, it’s hard to imagine them going much lower than they already are on the variable side — and indeed with talk of a vaccine rolling out in Canada as soon as early 2021, he can see a scenario in which rates start to increase faster than anyone expects.
Regardless, he’s very familiar with the paradox of why record low lending rates can be a double-edged sword.
“What makes my job a little bit tricky is often good news for mortgage rates is coupled with some bad events and that’s been the case with this pandemic,” he said.
WATCH | Why bankruptcies could follow a post-pandemic recovery
One bank is offering some customers a mortgage rate below one per cent and rates are generally down all over. Seems like good news — and it is for some but not necessarily for the economy as a whole. 1:44
Netflix (NFLX) stock slid as much as 9.6% Friday after the company gave a second quarter revenue forecast that missed estimates and announced it would stop reporting quarterly subscriber metrics closely watched by Wall Street.
On Thursday, Netflix guided to second quarter revenue of $9.49 billion, a miss compared to consensus estimates of $9.51 billion.
The company said it will stop reporting quarterly membership numbers starting next year, along with average revenue per member, or ARM.
“As we’ve evolved our pricing and plans from a single to multiple tiers with different price points depending on the country, each incremental paid membership has a very different business impact,” the company said.
Netflix reported first quarter earnings that beat across the board on Thursday, with another 9 million-plus subscribers added in the quarter.
ADVERTISEMENT
Subscriber additions of 9.3 million beat expectations of 4.8 million and followed the 13 million net additions the streamer added in the fourth quarter. The company added 1.7 million paying users in Q1 2023.
Revenue beat Bloomberg consensus estimates of $9.27 billion to hit $9.37 billion in the quarter, an increase of 14.8% compared to the same period last year as the streamer leaned on revenue initiatives like its crackdown on password-sharing and ad-supported tier, in addition to the recent price hikes on certain subscription plans.
Netflix’s stock has been on a tear in recent months, with shares currently trading near the high end of its 52-week range. Wall Street analysts had warned that high expectations heading into the print could serve as an inherent risk to the stock price.
Earnings per share (EPS) beat estimates in the quarter, with the company reporting EPS of $5.28, well above consensus expectations of $4.52 and nearly double the $2.88 EPS figure it reported in the year-ago period. Netflix guided to second quarter EPS of $4.68, ahead of consensus calls for $4.54.
Profitability metrics also came in strong, with operating margins sitting at 28.1% for the first quarter compared to 21% in the same period last year.
The company previously guided to full-year 2024 operating margins of 24% after the metric grew to 21% from 18% in 2023. Netflix expects margins to tick down slightly in Q2 to 26.6%.
Free cash flow came in at $2.14 billion in the quarter, above consensus calls of $1.9 billion.
Meanwhile, ARM ticked up 1% year over year — matching the fourth quarter results. Wall Street analysts expect ARM to pick up later this year as both the ad-tier impact and price hike effects take hold.
On the ads front, ad-tier memberships increased 65% quarter over quarter after rising nearly 70% sequentially in Q3 2023 and Q4 2023. The ads plan now accounts for over 40% of all Netflix sign-ups in the markets it’s offered in.
Netflix reported first quarter earnings after the bell on Thursday. REUTERS/Dado Ruvic/File Photo (REUTERS / Reuters)
Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
Oil prices initially spiked on Friday due to unconfirmed reports of an Israeli missile strike on Iran.
Prices briefly reached above $90 per barrel before falling back as Iran denied the attack.
Iranian media reported activating their air defense systems, not an Israeli strike.
Oil prices gave up nearly all of early Friday’s gains after an Iranian official told Reuters that there hadn’t been a missile attack against Iran.
Oil surged by as much as $3 per barrel in Asian trade early on Friday after a U.S. official told ABC News today that Israel launched missile strikes against Iran in the early morning hours today. After briefly spiking to above $90 per barrel early on Friday in Asian trade, Brent fell back to $87.10 per barrel in the morning in Europe.
The news was later confirmed by Iranian media, which said the country’s air defense system took down three drones over the city of Isfahan, according to Al Jazeera. Flights to three cities including Tehran and Isfahan were suspended, Iranian media also reported.
Israel’s retaliation for Iran’s missile strikes last week was seen by most as a guarantee of escalation of the Middle East conflict since Iran had warned Tel Aviv that if it retaliates, so will Tehran in its turn and that retaliation would be on a greater scale than the missile strikes from last week. These developments were naturally seen as strongly bullish for oil prices.
However, hours after unconfirmed reports of an Israeli attack first emerged, Reuters quoted an Iranian official as saying that there was no missile strike carried out against Iran. The explosions that were heard in the large Iranian city of Isfahan were the result of the activation of the air defense systems of Iran, the official told Reuters.
Overall, Iran appears to downplay the event, with most official comments and news reports not mentioning Israel, Reuters notes.
The International Atomic Energy Agency (IAEA) said that “there is no damage to Iran’s nuclear sites,” confirming Iranian reports on the matter.
The Isfahan province is home to Iran’s nuclear site for uranium enrichment.
“Brent briefly soared back above $90 before reversing lower after Iranian media downplayed a retaliatory strike by Israel,” Saxo Bank said in a Friday note.
The $5 a barrel trading range in oil prices over the past week has been driven by traders attempting to “quantify the level of risk premium needed to reflect heightened tensions but with no impact on supply,” the bank said, adding “Expect prices to bid ahead of the weekend.”
At the time of writing Brent was trading at $87.34 and WTI at $83.14.
