Frank Mortgage

Consumers buying cars in urban areas of Canada have access to a world of choices, but when it comes to buying a home, the choices are much narrower and are often set by the brokers they work with, according to Frank Mortgage founder and Chief Executive Officer Dan Scott.

"If you want to buy a car, you can go to these auto malls here in north of Toronto, and there's eight dealers all on the same street," Scott told Streetwise Reports. "You can see every car under the sun. (But) if you want to buy a house, a realtor will take you into the neighborhood you like and show you 12 homes. … It's the biggest financial commitment most Canadians will ever make. And they get no choice. There's no transparency."

There are many differences between the Canadian and U.S. mortgage systems, including the term length, but according to Scott, one of the key differences is the country is "five years behind" the U.S. and other countries in implementing technology in the mortgage space.

"We're looking to be a leader and innovator in that implementation of technology for the benefit of the consumer," Scott said.

First off, the company is not a mortgage lender, and Scott said it does not want to be. It sees itself as a gateway to seeing the best rates and deals available to consumers at any given time and then guiding them through the process with less pain and suffering. Think Jerry AI for mortgages instead of car insurance policies.

When you "get your mortgage with us, and then our online partner closes the deal, … customers will just have a single sign on," Scott said. "It's all just one seamless digital environment where you can get your mortgage completed."

Canada and US Mortgages: Apples and Oranges

There are major differences between Canadian and U.S. mortgages, one key one is the length of the term.

"In the U.S. your mortgage term spans the length of the amortization period," BMO Private Wealth explains. "So, at the end of the term, the mortgage will have been paid in full. Canadian mortgages also have an amortization period, which determines the total length of your mortgage, but the mortgage will most likely have a number of shorter mortgage terms within the amortization period. Mortgage terms establish the interest rate and mortgage conditions for a set period of time and are re-negotiated throughout the amortization period in Canada."

Like in America, the lending rates are set by a central bank, in this case the Bank of Canada (BoC). According to a post by Jonalyn Cueto for Canadian Mortgage Professional on January 20, the BoC is "preparing to make its first key policy decision of the year on January 29, with Canadians eager to see whether the central bank will cut its overnight lending rate further or hold steady."

The overnight rate influences borrowing costs for mortgages, loans, and other financial products in the country. It currently sits at 3.25%.

"Economists at TD Bank, led by James Orlando, predict a 25-basis-point reduction, a smaller cut than the 50-basis-point decrease announced in December 2024," according to Cueto's report. "If realized, the new rate would drop to 3.00%."

The timing of any rate decision is "critical, as it coincides with potential economic challenges," the report said. "(U.S.) President-elect Donald Trump has proposed a 25% tariff on Canadian exports, which could significantly impact Canada’s economy."

"There's fear that Trump's going to implement a slew of tariffs or measures that will negatively affect the growth of the Canadian economy,” Orlando told Cueto. "The Bank of Canada might want to take out a little bit more insurance and follow through with a rate cut."

But with inflation back to the BoC's 2% target, some experts say Canadians can anticipate lower mortgage rates this year, according to Alicja Siekierska writing for Yahoo! Finance Canada on January 6.

"Economists expect that the Bank of Canada will continue to reduce interest rates this year, albeit at a 'more gradual' pace," the author noted.

Rates to Affect Thousands of Borrowers

That interest rate decision will affect thousands of Canadians. According to a national report, overall mortgage debt increased in Canada to CA$2.2 trillion in July 2024.

"Renewal risk remains as 1.2 million mortgages will come up for renewal in 2025," the report also said. "Most of these will experience higher interest rates than when their term began: 85% of those were contracted when the Bank of Canada rate was at or below 1%."

Scott said his company is trying to make mortgages — and exposure to the range of rates available at any given time — more accessible to Canadian homebuyers. This includes making the process of getting a mortgage easier.

Consumers using normal brokers "don't see what's available to them, they only see one option, maybe two," he said. "You never know who has the best rate on any given day. And if you're a rate shopper, you need to talk to someone like us who is open and transparent."

The primary target audience includes new homebuyers, Gen Zers, millennials, and even some late Gen Xers that first-time homebuyers, the company said. But because they don't offer 30-year mortgages, "renewal business is huge," as well.

According to Siekierska reporting for Yahoo! Finance, there are around 40% of mortgages that are up for renewal going into 2025. While concerns about the impact of the renewal price shock have faded in the wake of the Bank of Canada’s loosening cycle, many Canadians will be under financial pressure as they renew at higher rates.

"The good news for those getting ready to renew their mortgage is that there will be competition among banks and lenders to retain and attract customers, which could lead to better deals for consumers," Victor Tran, a Toronto-based mortgage broker and Ratesdotca mortgage and real estate expert, told Siekierska.

Right on Your Cell Phone

And that's where Frank Mortgage comes into play. Consumers can see the available rates "right on their screen, right on their right on their cell phone, which is what all the new digital homebuyers of the future want," Scott said. "They can see information that they need to know to be able to make a good mortgage decision, readily available, (and) easy to access."

It will also "show them a marketplace of rates so they understand that there are dozens of lenders that want their business, not just the one that the typical broker will show them," he said.

Under the status quo, most of the country's residential mortgages are at big banks like RBC, Scotiabank, TD, CIBC, BMO, and Desjardins, according to Wowa Leads.

Scott said Frank Mortgage plans to building partnerships with other brokerages and firms to increase its database. He said the company has some existing realtor partners and is "bringing on some very significant additions to those partnerships in 2025, which will grow our volume in multiples."

Frank Mortgage is a private company. Scott said it recently completed a capital raise of CA$1.5 million to help raise awareness of the brand.

"We're going to be smart about it," Scott said. "We're not going to do a lot of just random digital marketing. We're going to do partnership marketing for the most part, and we will do some alternative types of brand-building exercises."