Posted Rates Coming Down…Finally!

Posted-Mortgage-Rates Lenders have kept posted mortgage rates higher than normal for months.

Now RBC has announced the biggest cut to posted rates that we’ve ever seen.  The posted rate on their 5-year fixed mortgage is falling almost one percent (0.96% to be exact).  The rate change takes effect tomorrow.

This is the biggest posted reduction from any bank in at least 10 years.  Prior to this the biggest cut to 5-year posted rates was 0.34% last May.

RBC also announced 1-3-year rate reductions and a slew of new rate specials.  These rate specials reinforce the trend in big banks getting ultra-aggressive as of late.  This will no doubt put pressure on other lenders to catch up with falling bond yields and cut themselves.

Regarding variable-rate mortgages, there hasn’t been much news on spread changes thus far.  The only thing we’ve seen is a few lenders increasing from prime + .60% to prime + .80%.  Most likely this is due to margin compression as a result of the reduction in prime rate.

As always, the best deals can change daily.  Consult a mortgage professional and ask him/her to compare the best deals from all lenders.

  1. I could see how 4.49 for 5 years might seem attractive if you are renewing right now, but for anyone that switched to a variable last Summer and had prime – .7 or more, this rate does not look so sweet.

  2. The big question for me is this: for those of us with fixed-rate mortgages right now, at what point does it make sense to refinance at a lower rate?
    Are there calculators online that can do the math to figure out the payback period for a refinance in Canada?

  3. We currently have a prime -.35 variable. Obviously were enjoying these rate drops. BUT, when do we bite the bullet and sign into the RBC 5 year locked @ 4.49%? We may be able to get slightly lower too. Our set bi-weekly payments amount to just under 5% with the extra pounding the princaple. What’s our trigger rate? Don’t want to miss the boat. Thanks!

  4. I wonder how much lower (if any) will RBC offer to their exising mortgage holder. 4% for 5 years would be amazing, lol (is that even possible??)

  5. I’d like to echo “nubber”‘s question — when do we bite the bullet? Considering we have a prime -.65, is there any chance of us missing the boat anytime soon? (mixing up my metaphors a bit here)

  6. I’ve noticed that banks usually offer a better mortgage rate than their posted rate. If posted rates decrease, does that mean that the “discounted” rate offered by the bank will drop as well?

  7. George: the problem I usually run in to when talking to people about refinancing their fixed rate mortgages at a lower rate is the enormous IRD (Interest Rate Differential) penalty incurred.
    For the sake of argument, if you had a $300,000 mortgage at 5.5% amortized over 25 years and you were half way through a 5 year mortgage term, your IRD penalty would be over $7100! Since the savings for the remainder of the term with an interest rate 1.0% lower would amount to just over $4,000 (based on the difference in payments), it would definitely not be worth it.
    Every case is different and your situation likely doesn’t look anything like my little example. Talk to your lender or contact a mortgage specialist.

  8. hey Mortgages in AB, could you give us a hint at least who has better than 4.49% fixed for 5 years?? i havent seen any !

  9. Hi Mortgage Novice,
    Thanks for the note. We try not to post non-publicly available rates on CMT because a lot of lenders don’t like it and because it’s impossible to determine product suitability beforehand, which is one of our responsibilities.
    The best bet is to have a chat with a mortgage planner and tell them what you’re looking for. Or feel free to give us a call/email if we can be of help.
    Cheers,
    Rob

  10. Quote: “I’ve noticed that banks usually offer a better mortgage rate than their posted rate. If posted rates decrease, does that mean that the “discounted” rate offered by the bank will drop as well?”
    Hi Sally,
    In most cases yes.
    Cheers,
    Rob

  11. Quote: “The big question for me is this: for those of us with fixed-rate mortgages right now, at what point does it make sense to refinance at a lower rate?
    Are there calculators online that can do the math to figure out the payback period for a refinance in Canada?”
    Hi George,
    Good to hear from you. I’ve seen a few refi calculators online but can’t remember the web address. Melanie and I use a spreadsheet ourselves. If you’d like, feel free to drop us a line and her or I can run the numbers for you.
    Cheers,
    Rob

  12. Just talked to rbc. trying to refinance my 315K deathpledge. have 4 years left on the term at 5.9%. They quoted me the interest rate differential penalty at just over $16,000! No 3 month penalty allowed as it wasn’t in my contract. Didn’t work out for me. Seems like it is lose-lose unless you are about to renew or get a new mortgage.

  13. You could still probably save $20k in interest over 4 years by refinancing–leaving you with $4k net gain before closing costs.

  14. hi sir i have imorgage 5 years fix at 5.5 my balance for morgage is 309000$ and i want to refinance mymorgage.i want to no if it is worded to refinance with 4.49 today rate.how much penalty do i have to pay in this case,please let me no tanks a lot.

  15. IMO it’s better to call your lender yourself to determine your penalty.
    Certain lender’s penalties are calculated differently.

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