The Best Mortgage Rates In Canada For 2023

As autumn leaves give way to the early whispers of winter, Canadians are wrapping up warm not just against the chill in the air but also to navigate the cool complexities of the mortgage market. November 2023 has unfurled a tapestry of opportunities for potential homeowners and investors alike, with mortgage rates fluctuating like the unpredictable fall winds. In the quest for the most favourable mortgage terms, knowledge is as vital as a sturdy roof over one’s head during the cold Canadian months.

This blog post sheds light on the ‘Best Mortgage Rates in Canada for November 2023,’ offering a beacon of guidance through the frosty financial landscapes. It is tailored to empower you with up-to-date information, tips, and strategies to secure a mortgage rate that not only warms your budget but also supports your long-term financial well-being. Whether you’re a first-time buyer or a seasoned property connoisseur, understanding the nuances of Canada’s current mortgage rates is the key to unlocking the door to your new home or investment property as we approach the year’s end.

Our Top Choices for the Best Mortgage Rates In Canada

Bank	1 year fixed	3 year fixed	5 year fixed	5 year variable	10 year fixed
BMO	8.1%	7.25%	7.04%	7.2% (Prime + 0.00)	7.49%
TD	7.84%	7.14%	7.04%	7.05% (P – 0.25)	7.25%
National Bank	7.89%	7.14%	7.04%	7.2% (P + 0.00)	7.49%
CIBC	7.69%	7.24%	7.09%	7.20%	7.89%
RBC	8.09%	7.3%	7.14%	7.3% (P + 0.1)	7.7%
Simplii	x	7.19%	7.04%	7.2%	7.49%
Tangerine	7.89%	6.69%	6.49%	7.1%	7.09%
Scotiabank	8.04%	7.24%	7.04%	7.65%	7.69%
Laurentian	7.04%	6.79%	6.49%	6.9% (P – 0.3)	7.49%
HSBC	7.34%	6.74%	6.89%	7.4%	7.09%

What are the Different Types of Mortgages?

In Canada, the mortgage landscape is diverse, offering various types of mortgage products to fit the financial situations and preferences of different borrowers. Here’s a rundown of the different types of mortgages available:

Fixed-Rate Mortgage:

This is the most traditional mortgage type where the interest rate remains constant throughout the term of the loan, typically ranging from 1 to 10 years. Borrowers often prefer fixed-rate mortgages for the stability and predictability they provide, as their regular payment amount doesn’t change even if the market rates do.

Variable-Rate Mortgages (VRM):

With a variable-rate mortgage, the interest rates can fluctuate with the lender’s prime rate. The total payment amount can change throughout the term. Some VRMs maintain fixed payments but vary the amount that goes towards the principal. They can be advantageous when interest rates are predicted to decrease, potentially saving borrowers money over the term.

Adjustable-Rate Mortgages (ARM):

Similar to variable-rate mortgages, the interest rate on an ARM changes with market conditions. However, with ARMs, both the interest portion of the mortgage payment and the total payment can fluctuate, which makes budgeting a bit more challenging.

Hybrid or Combination Mortgages:

These products combine elements of both fixed and variable-rate mortgages. Typically, part of the mortgage will be financed at a fixed rate and another portion at a variable rate. This can offer a balance of security and potential interest savings.

Open Mortgages:

Open mortgages can be paid off at any time without penalty. They usually come with higher interest rates but offer the flexibility to make large lump-sum payments or to pay off the entire mortgage early. They are ideal for those expecting to receive a large sum of money or sell their home soon.

Closed Mortgages:

Closed mortgages mostly have lower interest rates than open mortgages but come with restrictions on the amount of additional payment allowed. Paying off the mortgage entirely before the end of the term can incur penalties.

Convertible Mortgages:

These allow borrowers to switch from a variable rate to a fixed rate during the mortgage term, or vice versa, usually without a penalty. This option provides some flexibility to take advantage of changing market conditions.

Reverse Mortgages:

Designed for senior homeowners, reverse mortgages allow them to borrow money against the equity in their homes. The loan doesn’t have to be repaid until the home is sold or the homeowner passes away.

Home Equity Lines of Credit (HELOC):

While not a traditional mortgage, a HELOC allows homeowners to borrow money against the equity in their home. It works like a credit card with a limit based on a percentage of the home’s equity.

Capped Rate Mortgages:

These are a type of variable-rate mortgage where the interest rate is variable but cannot exceed a certain ‘cap’. This offers some protection against rising rates.

Construction Mortgages:

These are loans that cater to home builders, with funds released in stages as the building progresses.

Understanding the mortgage options in Canada is crucial in selecting the right one for your financial situation. The best mortgage for you will depend on your tolerance for risk, financial stability, future plans, and the current economic environment. It’s always recommended to consult with an expert mortgage professional to help navigate these choices.

Is a Variable Rate Mortgage Better?

The question of whether a variable-rate mortgage is better in Canada cannot be answered with just a ‘yes’ or ‘no’ as it mainly depends on individual circumstances and financial goals, as well as market conditions.

Variable-rate mortgages typically offer lower initial rates than fixed-rate mortgages because they come with the risk that rates may increase over time. Here are some points to consider that might make a variable-rate mortgage a better option for some borrowers:

• Market Trends: If the market trends suggest that interest rates will remain stable or decline over time, a variable-rate mortgage could end up being more cost-effective.
• Flexibility: Variable-rate mortgages often come with the option to change it to a fixed-rate mortgage, which can provide borrowers with a safety net if they believe rates will go up significantly.
• Prepayment Privileges: Many variable-rate mortgages offer more flexible pre payment options. This means you can make extra payments or pay off the mortgage entirely without facing hefty penalties.
• Lower Penalties: Should you break a variable-rate mortgage, the penalties are typically three months’ interest, which is usually less than the Interest Rate Differential (IRD) penalty for breaking a fixed-rate mortgage.
• Potential Savings: Over time, historical data has often shown that variable-rate mortgage holders save money in interest compared to fixed-rate borrowers. However, this is based on past performance and not a guarantee of future outcomes.

Conversely, here are some reasons why a variable-rate mortgage might not be the better choice:

• Risk Aversion: If you prefer predictability in your financial planning, a fixed-rate mortgage provides the certainty of having knowledge of exactly what your payments will be throughout the term.
• Rising Rates: Should interest rates rise, your mortgage payments will increase with a variable-rate mortgage. This can lead to higher payment amounts that you must budget for.
• Financial Stress: If you are on a tight budget, unexpected increases in your mortgage payments could cause significant financial stress.
• Complex Budgeting: As interest rates fluctuate, so will the amount of your payment that goes towards the principal versus interest. This can make long-term budgeting more complex.

Ultimately, whether a variable-rate mortgage is “better” will depend on the individual’s financial situation, risk tolerance, and economic projections. It’s often wise to speak with a financial advisor or a mortgage specialist who can provide advice tailored to your personal financial situation and the current economic climate. They can help you analyze the options, considering both your personal financial situation and the current and projected interest rate environments.

What Affects Your Mortgage Rate in Canada?

A number of factors can influence the mortgage rate that a borrower might receive in Canada. Understanding these can help you navigate the process more effectively and potentially secure a more favourable rate:

• Credit Score: One of the primary factors lenders look at is your credit score. A higher score can indicate to lenders that you’re a lower-risk borrower, which can lead to a lower interest rate.
• Down Payment: The size of your down payment can affect your mortgage rate. Typically, a larger down payment is seen as less risky by lenders and can result in lower rates. The lowest down payment in Canada is 5% but putting down 20% or more can help you avoid paying for mortgage default insurance.
• Debt-to-Income Ratio (DTI): This measures your total debt payments on a monthly basis as a percentage of your gross monthly income. A lower DTI can lead to a better mortgage rate because it indicates you’re not over-leveraged.
• Amortization Period: The length of time you choose to pay off your mortgage can also affect your rate. Shorter amortization periods often come with lower interest rates because lenders recoup their money faster, reducing their risk.
• The Economy: Economic factors such as the Bank of Canada’s benchmark rate, inflation, and the health of the housing market all influence mortgage rates. When the economy is strong, rates may rise to keep inflation in check, and when it’s weaker, rates might drop to encourage borrowing and investment.
• Type of Mortgage: As discussed earlier, fixed-rate mortgages have higher rates than variable-rate mortgages because they offer price stability.
• Property Type and Use: The rates can differ based on whether the property is owner-occupied, an investment property, a second home, or a rental. Investment properties typically have higher rates due to the perceived higher risk.
• Mortgage Product and Lender: Different lenders have different rates and products. Some may specialize in certain types of mortgages that might offer better rates for your situation.
• Insurance: If you have less than a 20% down payment, you’ll need to purchase mortgage default insurance, which safeguards the lender in the event that you default on your loan. While this insurance can add to the cost of the mortgage, it also often allows you to access lower interest rates.
• The Term Length: Mortgage terms in Canada typically range from 1 to 10 years. Rates can vary significantly between shorter-term and longer-term mortgages. Shorter terms traditionally carry lower rates because they present less risk to lenders due to the uncertainty of rate fluctuations over time.
• Rate Hold Period: When you get a mortgage rate quote, lenders will offer to hold that rate for a certain period, typically between 90 and 120 days. If rates increase during that period, you will still have access to the lower rate.
• The Bond Market: Fixed mortgage rates are generally tied to the Canadian bond market. When yields on government bonds go up, mortgage rates tend to follow.

When you’re looking to secure a mortgage, it’s beneficial to take these factors into account and work on the ones you can control, like making your credit score better or saving for a larger down payment. Engaging with a mortgage broker can also help, as they can guide you through the process and find a lender that may offer you the best possible rate for your situation.

How Do I Qualify for a Mortgage in Canada?

Qualifying for a mortgage in Canada is a process that involves meeting certain criteria set by lenders. These criteria will assess your financial stability and reliability as a borrower. Here’s what you need to qualify for a mortgage in Canada:

• Credit Score: Having a good credit score is extremely vital. In Canada, lenders typically prefer a score of 680 or above for the most favourable rates. However, scores between 600-679 might still qualify for a mortgage, potentially at higher rates.
• Stable Income: Lenders need to see that you have a stable and predictable income to support your mortgage payments. This typically means providing proof of income through pay stubs, tax returns, or employment letters.
• Employment History: A consistent employment history within the same field or industry can be an indicator of financial stability, which lenders favour. Generally, lenders look for at least two years of continuous employment history.
• Debt Service Ratios: There are two key ratios lenders use:

=Gross Debt Service Ratio (GDS): This measures the portion of your income that would go towards housing costs. It includes your mortgage payments, property taxes, heating expenses, and half of your condo fees (if applicable). The GDS is typically required to be less than 32% of your gross income.
=Total Debt Service Ratio (TDS): This includes all your debt obligations, such as car loans and payments through credit cards, in addition to the housing costs. The TDS should usually be less than 40% of your gross income.

• Down Payment: You need the lowest down payment of 5% of the purchasing price for homes less than $500,000. For homes priced between $500,000 and $999,999, you’ll need 5% on the first $500,000 and 10% on the portion of the price above $500,000. Homes that are $1 million or more require a 20% down payment. The source of the down payment can be from savings, investment, or a gift from a family member.
• Mortgage Loan Insurance: In the case of your down payment being less than 20% of the purchase price, you’ll need mortgage loan insurance. This helps to safeguard the lender in case you default on the mortgage. The cost can be added to your mortgage or paid upfront.
• Property Appraisal: A lender may require an appraisal to make sure the property is worth the loan amount. It also gives them assurance about the resale value of the property if the mortgage were to go into default.
• Proof of Assets and Liabilities: You must provide information about your assets (such as investments or savings) and liabilities (such as existing loans or credit card debt).
• Lawyer or Notary: You will need a lawyer or notary in Canada to process the mortgage, ensure all the legal documents are in order, and register the mortgage.
• Mortgage Pre-Approval: While not a requirement to qualify, getting pre-approved for a mortgage can give you an idea of what you can afford and lock in an interest rate for you, usually for 90 to 120 days.

What is the Mortgage Term Length?

In Canada, the mortgage term length refers to the period during which the current interest rate and conditions of the mortgage contract are in effect. This should not be confused with the amortization period, which is the total time it will take to pay off the mortgage in full.

Here’s a detailed look at mortgage term lengths in Canada:

Short-Term Mortgages:

• These typically range from six months to three years.
• Short-term mortgages may be appropriate for those who anticipate rates will drop or who plan to move in the near future.

Long-Term Mortgages:

• Long-term mortgage terms can range from four to ten years, with five years being the most common.
• These terms are suited for borrowers who prefer the stability of being aware of what their payment will be over a longer period, which aids in long-term budgeting.

Variable vs. Fixed Terms:

• A fixed-term mortgage has an interest rate that remains unchanged throughout the term, offering stability in payments.
• A variable-term mortgage has an interest rate that will fluctuate with the market’s prime rate. This option can be beneficial if rates decrease, but there is also the risk of increasing rates.

Open vs. Closed Mortgages:

• Open-term mortgages allow you to pay off your mortgage at any time without a penalty, offering the most flexibility but often at higher rates.
• Closed-term mortgages usually have lower rates but come with restrictions on the amount of the mortgage that can be paid off early and may have penalties for breaking the mortgage term.

Mortgage Term Considerations:

• Interest Rate Changes: The chosen term can impact how you are affected by interest rate fluctuations. Longer terms protect against rate increases, while shorter terms can take advantage of falling rates.
• Penalties: Breaking a mortgage term can come with high penalties, especially with fixed-rate, closed mortgages. It’s essential to understand these penalties before choosing your mortgage term.
• Renewal: At the end of the mortgage term, you have the choice to renew your mortgage at the current market rates and conditions or to switch lenders without penalty.
• Flexibility: Some lenders offer convertible terms, allowing borrowers to switch from a short-term to a long-term mortgage without penalties, should their circumstances change.
• Stress Test: Regardless of the term, you will be subjected to a mortgage stress test in Canada, ensuring you can afford the mortgage should interest rates rise.

Selecting the right mortgage term is a balancing act between securing a favourable interest rate and maintaining enough flexibility to adapt to life changes without facing steep penalties. The choice you will make will be dependent on your financial situation, your risk tolerance, and your future plans. It’s often recommended to seek advice from a mortgage professional to understand the nuances and find the term that best aligns with your personal and financial goals.

How are Mortgage Rates Determined?

In Canada, mortgage rates are determined by a combination of factors that range from broad economic conditions to individual lender policies and consumer factors. Understanding these can help you navigate the mortgage market more effectively. Here’s an outline of how mortgage rates are determined in Canada:

Economic Health:

• Bank of Canada’s Policy Rate: The policy interest rate set by the Bank of Canada influences lending rates across the country. When the policy rate is low, mortgage rates tend to be lower as well.
• Bond Market: Fixed mortgage rates are closely tied to government bond yields, particularly the 5-year bond yield. When investors demand higher yields, mortgage rates typically increase.

Lending Institution Factors:

• Cost of Lending: Lenders set rates based on the cost of acquiring the money they lend out, which includes the rate they pay to obtain the funds plus a markup for profit.
• Competition: Competitive pressures can lead lenders to adjust their rates to attract customers.
• Operating Costs and Risk Margin: Lenders will consider their operational costs and the necessary margin to offset risks, such as the possibility of borrowers defaulting.

Housing Market Conditions:

• Supply and Demand: In a housing market which is hot with high demand, lenders may increase rates due to the increased loan demand.
• Housing Market Stability: A stable housing market can lead to better mortgage rates because the risk of default is perceived to be lower.

Consumer Factors:

• Credit Score: Individuals with higher credit scores can often secure lower mortgage rates as they are considered less risky to lenders.
• Down Payment: The size of the down payment can affect the mortgage rate; a larger down payment often results in a lower rate since it reduces the lender’s risk.
• Debt-to-Income Ratio: A lower debt-to-income ratio may qualify you for lower mortgage rates, as it indicates a strong ability to manage and repay debt.
• Amortization Period: Typically, shorter amortization periods can get you a lower rate because the lender’s risk is reduced over a shorter time frame.

Type of Mortgage:

• Fixed vs. Variable Rates: Fixed rates are usually higher than variable rates at the outset because they offer the certainty of a locked-in rate. Variable rates can start lower but may increase over time.
• Mortgage Term: The mortgage term length can influence the rate. Shorter terms may have lower rates due to the reduced risk of rate changes over the term.

Government Regulations:

• Regulatory Changes: Government-imposed rules, such as stress tests and lending guidelines, can indirectly influence mortgage rates by changing the risk profile of borrowers.

International Influences:

• Global Economic Climate: Global economic events can affect Canada’s economy and, subsequently, mortgage rates. For instance, if global conditions push up the cost of borrowing for Canada, this can trickle down to consumer mortgage rates.

When considering a mortgage, it’s important to keep in mind that rates can be negotiable to some extent. Shopping around and discussing your options with multiple lenders or a mortgage broker can potentially lead to better rate offers. Additionally, promotional rates and special offers can also impact the rate you’re able to secure.

Knowing all these factors can give you an edge in negotiations and help you find a mortgage that fits your financial situation. Always consult with financial advisors or mortgage specialists to get the most current and personalized advice.

What Are the Average Mortgage Rates in Canada?

The average mortgage rates in Canada fluctuate based on economic conditions, Bank of Canada policy decisions, and the lending environment. As of April 2023, you can get a general idea of the average rates for different types of mortgages in Canada below, but for the most current rates, one would need to check with financial institutions or mortgage rate comparison websites.

Here’s a breakdown of what the average mortgage rates might look like for different mortgage types:

Fixed-Rate Mortgages:

• 5-Year Fixed: Historically the most popular option in Canada, the 5-year fixed mortgage rates may range around 3-5%.
• 10-Year Fixed: Typically, these rates are slightly higher than the 5-year fixed rates, reflecting the longer guarantee against rate increases.

Variable-Rate Mortgages:

• 5-Year Variable: Variable rates are usually lower than fixed rates and might range from 2-4%. They can change with the lender’s prime rate, which is affected by the Bank of Canada’s policy rate.

Hybrid and Adjustable Rates:

• Hybrid Mortgages: These combine both fixed and variable elements, and rates will depend on the terms of the product offered by the lender.
• Adjustable-Rate Mortgages (ARMs): Similar to variable-rate mortgages but with adjustments to the principal and interest payments as rates change.

It’s essential to remember that the average rates will vary by lender and region and are also impacted by your personal financial situation, including credit score, income stability, down payment size, and the property’s value.

For the most accurate and recent information, you should reach out to banks, credit unions, mortgage brokers, and online financial platforms. They can provide up-to-date rates and may offer rate guarantees for a certain period while you shop around. It’s also a smart move to keep an eye on the Bank of Canada announcements, as any changes in the policy rate can lead to adjustments in mortgage rates across the board.

For those looking to secure a mortgage, consider not just the rates but also the flexibility and features offered by the mortgage product, such as the ability to make prepayments or the penalties for breaking the mortgage term. These can have a significant impact on the overall cost of the mortgage over its lifetime.

What are the Best Mortgage Rates in Canada?

Identifying the “best” mortgage rates in Canada is subjective and is dependent on individual circumstances and market conditions and varies accordingly. However, the best rates are typically the lowest rates of interest that a borrower can qualify for, considering their credit score, down payment, and other financial factors.

As of the latest data up to April 2023, the best mortgage rates in Canada could be found by comparing offerings from various financial institutions, including big banks, credit unions, and alternative lenders. Online comparison tools and mortgage brokers can also facilitate access to competitive rates.

To give a sense of what might be considered competitive rates, here are some scenarios:

For Fixed-Rate Mortgages:

The best rates for a 5-year fixed-rate mortgage might hover slightly above the rate of inflation and could be in the lower percentile of the rates available in the market, often with smaller lenders or through promotional offers.

For Variable-Rate Mortgages:

Competitive variable rates are typically lower than fixed rates and can offer significant savings. The best rates for variable mortgages might be close to the prime rate, with a small discount applied.

For High-Ratio Mortgages (those who have less than 20% down payment):

Due to mandatory mortgage default insurance, lenders often offer lower rates for high-ratio mortgages since the insurance reduces their risk.

For Conventional Mortgages (those with 20% or more down payment):

The best rates are often slightly higher than high-ratio mortgage rates but still competitive within the market.

It’s important to note that the best rate for one borrower may not be the best for another. Factors such as the desire for flexibility in repayment, the need for fixed monthly payments, and the risk tolerance for potential rate increases all play a role in determining the most advantageous mortgage rate for an individual.

Furthermore, mortgage rates can change frequently. They are affected by various factors, including changes in the economy, modifications in the Bank of Canada’s policy interest rate, and fluctuations in the bond market. Therefore, it’s always recommended to get the latest quotes and consult with a mortgage advisor to ensure you are getting the best rate for your specific situation.

For up-to-date information on mortgage rates in Canada, prospective homeowners should research current rates, consider their financial standing, and consult with financial advisors or mortgage brokers to secure the best possible rate for their mortgage.

What are Mortgage Prepayment Penalties?

Mortgage prepayment penalties in Canada are fees that lenders charge if you pay off your mortgage faster than the agreed-upon terms in your contract. They’re designed to compensate the lender for the interest payments they will miss out on due to the early repayment.

The two main types of prepayment penalties that you might encounter with Canadian mortgages are:

Three-Months’ Interest Penalty:

This is common for variable-rate mortgages. Suppose you decide to pay off your mortgage early or refinance. In that case, the penalty is typically equivalent to three months of interest payments on the outstanding balance of your mortgage at your current rate.

Interest Rate Differential (IRD):

This penalty applies mainly to fixed-rate mortgages when you pay off your mortgage before the end of the term. The IRD is a calculation that considers the amount you are prepaying, the current interest rate you’re paying, and the rate the lender could charge today for a mortgage term that’s similar to the remaining term of your existing mortgage. If current rates are lower than the rate on your mortgage, this penalty can be quite substantial, as the lender is seeking to recoup a portion of the profit they would lose.

Some important points about mortgage prepayment penalties in Canada are:

• The specific details of how these penalties are calculated can be complex and vary widely between different lenders. It’s critical to read the fine print in your mortgage agreement to understand the potential costs.
• Federal regulations require lenders to provide a clear explanation of how your prepayment penalty would be calculated if you decide to break your mortgage early.
• Many lenders offer prepayment privileges that allow you to pay a certain percentage of the original mortgage balance per year (usually 15% to 20%) without triggering a penalty.
• Penalties can be triggered not only by paying off the mortgage completely but also by paying more than the allowed additional amount, refinancing the mortgage, or breaking the mortgage contract to switch to another lender for a lower rate.

Because these penalties can amount to thousands of dollars, it’s essential for homeowners to consider them when thinking about making extra mortgage payments, refinancing, or selling their home before the end of their mortgage term. It’s often advisable to talk to your lender or a mortgage advisor to understand how much you would have to pay in prepayment penalties under various scenarios and decide on the best course of action for your financial situation.

Is It Worth Working with a Mortgage Broker?

Working with a mortgage broker in Canada can be beneficial for many prospective homebuyers, but whether it’s worth it for you depends on your specific circumstances, your financial knowledge, and your willingness to negotiate with lenders.

Benefits of Working with a Mortgage Broker:

• Access to Multiple Lenders: Mortgage brokers have relationships with a variety of lenders, including some that do not directly deal with the public. This means they can provide a wide range of products and rates that you might not find on your own.
• Time-Saving: Searching for the best mortgage can be time-consuming. A broker can save your time by doing the legwork of comparing rates and terms from different lenders.
• Expert Advice: Brokers are knowledgeable about the mortgage market and can offer expert advice on mortgage products that fit your needs. They can help you understand the pros and cons of different mortgage terms and features.
• Customization: A broker can help tailor a mortgage product to your specific financial situation, which can be particularly helpful if you have a less-than-standard financial background (e.g., self-employed, non-traditional income).
• Negotiation Power: Mortgage brokers may have more leverage in negotiating rates and terms with lenders due to the volume of business they represent.
• No Cost to You: Brokers are typically paid a commission by the lender, not the borrower, so their services are usually at no direct cost to you (though indirect costs may be passed on in your mortgage rate or terms).

Potential Downsides to Consider:

• Broker’s Interests: Brokers earn a commission from lenders, which may influence the products they offer you. It’s important to ensure that your broker is recommending the best product for you, not just the one with the highest commission.
• Limited Access: Some lenders, particularly larger banks, may offer exclusive rates or products directly to customers that are not available through brokers.
• Personal Preference: Some people prefer to have direct control over the financial process and may enjoy the challenge of shopping around and negotiating themselves.

So, working with a mortgage broker in Canada can give you access to a better range of mortgage products, save time, and potentially lead to better rates and terms on your mortgage.

However, it’s important to do your due diligence and ensure that the broker you choose is reputable and has your best interests in mind. Whether or not it’s worth working with a mortgage broker also depends on your confidence in handling financial negotiations and your willingness to research and compare mortgage options on your own.

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