Opposite Day For BMO & RBC

The 5-year government bond yield is up 30 basis points this month, based on yesterday’s close. That’s a fair-sized jump in eight days.

When yields do that and remain elevated, lenders usually raise fixed rates. That started to happen on Monday and Tuesday. We saw five non-bank lenders lift 5-year fixed rates and/or eliminate their “quick-close specials.”

BMOBMO & RBC had a different idea. They flipped their playbooks upside down, did the opposite of what you might expect, and actually cut fixed rates. (BMO Link, RBC didn’t issue a release)

RBCBMO & RBC’s 5-year posted rates have been cut to 5.25% (from 5.39%).  Their “special offer” 5-year rates are down 0.14 pp to 3.95%.

BMO & RBC’s advertised 5-year fixed mortgages now have a spread of 116 bps above GoCs (again, based on yesterday’s close).  That’s slim compared to the normal 125-135+ bps. We hear BMO’s discretionary rates are as low as 85 bps above Canada’s.

Competitors are likely looking at these numbers and shaking their heads.  For a major bank like BMO to flaunt rates is quite rare—refreshing, but rare.

While terrific for consumers, from a business standpoint, you have to wonder if BMO, for one, is overly anxious to regain lost market share. They will get some marketing traction out of this, no doubt. The questions are, how long will it last, what is the benefit if the other Big 5 match, and will the short-term volume gains offset the serious margin compression.


Update:  There’s a bit of uncertainty as to which lender lowered first (BMO or RBC) so we’ve updated the story to reflect both lenders.

In addition to the fixed-rate cuts, both banks have lowered their variable rates to prime – 0.15%.

So far we’ve seen no match to the posted rate reductions from the other Big 6 banks.

Update 2:  The spreads tighten further…The 5-year yield is up to 2.83% as of lunch ET.

Update 3:  RBC’s rate change was effective March 9 at 12:00am–i.e., before BMO’s. They chose not to issue a press release.  Sometimes they want people to know about their rate changes and sometimes they don’t.

  1. Yeah?!? We are really surprised at CMT for completely neglecting to mention the 3.75% rate, and pretending it doesn’t even exist.
    It only came into effect two days ago, how can your post about BMO fixed mortgage rates not have addressed it?
    Very surprising coming from such a high-calibre and reliable site.

  2. Wow. Lighten up Dan. Until you start paying for content on this site, I’m not sure you have the right to criticize its content . . .
    Nothing has changed with the BMO 3.75% special offer. Today’s news has to do with their non-promotional, regular mortgages.

  3. Since BMOs 3.75% is a slightly different animal compared to BMOs regular fixed term mortgages, I think it is logical to leave it out of the comparison.
    If you want that included then you may also want to note that CIBC has advertised a 3.99% with 2% cashback (effective 3.55% or so). I don’t know the fine print, but that is a “wow”.

  4. Thanks Mav44,
    You wouldn’t happen to have a link to this effect?
    BMO issued it’s release at 6:58pm yesterday and we noticed the change to RBC’s site after that. Unfortunately RBC didn’t issue a release announcing the change.
    We’ll clarify from RBC on when they moved.
    Suffice it to say, both cuts deserve mention so we’ve updated the story.
    I also happen to think BMO’s a little more anxious to regain market share due to it’s more publicized share decrease and its 3.75% promo announcement March 2.
    Anyhow, cheers for now…

  5. Hi Rachel,
    In addition to John’s link below (thanks John) we did a comparison of this and BMO’s 3.75% deal for the Globe. Link: BMO vs CIBC
    We also tweeted about CIBC’s special on March 5. Canadian Mortgage News
    We try to post all interesting mortgage offers on our Twitter feed when we don’t have time for a full story.

  6. how about mentioning CIBC 3% cash back 3yr 3.3% fixed rate!! This is an incredible offer. Just call CIBC or go in and you can get it. (Effective rate 2.30!)

  7. Are you serious ? (Sounds too good to be true).
    Is this available to people with good credit rating, or is it reserved for only those who move their million dollar investment to CIBC ?
    Is it published anywhere ? Thanks.

  8. Sorry, I didn’t mean to come off too critical, it’s just that after reading the whole posting and with no mention of the 3.75% (even in brackets) I thought it had already been pulled, maybe due to rising bond yields.
    Still, this is great news, I bet good negotiators can get 3.50% on a five-year fully discounted rate now … unbelievable.

  9. oh, forgot to mention, I personally have never done any business with the CIBC & have had no history with them. I guess they want new business.

  10. Hi, I asked for the 3 year cash back mortgage at CIBC and have been quoted 2% cash back and 4.15%. No offense but that sucks. I have found 3.25% through my broker with no strings attached.

  11. I was hoodwinked on this site! Last week we were told that come this week all the rates would be going up because bond rates were rising. Then the complete opposite has occured, the big banks are lowering their rates! The people on here with postings don’t know what is going on! I locked in at 3.75% and now you can do better!

  12. Steve,
    I’m sorry you feel this way. But nothing that was said was saying that these changes were definite. They are stating

      And making advisory comments based on trends and research. These aren’t predictions and there is no way to tell for certain what will happen. Regardless locking in at 3.75% really isn’t that bad considering last year at this time the rates were higher. But this site is right usually when bond yields go up so does the rates.

  13. Further to Steve’s point, no one could have known that RBC would drop rates when bond yields are making five month highs. It is very reasonable to expect that rates will rise because they almost always do in this type of environment. In fact, fixed rates did increase this week at several lenders. I consider myself lucky to have this site as a resource. Remember, nothing is absolute in this business.

  14. I might have blamed the wrong people, this person seems to be a pumper for the Banks, I quote:
    Banker in Ivory Tower said…
    To turn this thread back to the original heading and for good reason, has anyone noticed what has been going on in the bond market these last few days? Anyone looking at obtaining a 5 year fixed had better get into their bank or call their broker today and get today’s rate locked in. That’s TODAY because The 5yr GOC bond rate has shot up in the last few days (17 basis points so far today) and all immediate indications are that 5yr Fixed mortgages are on their way back up. As it stands right now if things hold, we are looking at a 30 basis point increase to 5 year fixed mortgages by this time next week. Thoughts anyone?
    banker in ivory tower said…
    People that know me know that I never make predictions but this one is a certainty. This ride looks to have wheels on it.
    Long-term, fixed rate mortgages are going up probably 30 basis points on a 5yr fixed by early next week. lock-em down, right now people!
    finally he/she said….
    banker in ivory tower said…
    GOC 5 yr bonds are on a tear and still going up. Rack em and stack em people. The 5 year fixed are going up next week and you heard it here first!
    This person works for the banks and is trying to undermine what brokers do. They hooked me, I feel really stupid locking in now, but oh well 3,75% is ok, at least i am not going to fret over ups or downs.

  15. Maybe one possible offsetting factor working against the rising yields is, now that RRSP season is over, banks are turning their focus to the spring home-buying season and trying to compete for mortgages.

  16. As a comsumer, I really welcome when banks drop their mortgage rates.
    While an increase in 5 year boc bond yeild is an indicator for the lenders to increase their rate, are there any other indicators out there that we can look at?
    I mean, it seems like the rates are at rock bottom, but yet the big banks are still dropping their rates. Do they know something that we don’t or are they just having a price war to gain market share?
    Rob, you mentioned that there are 5 lenders lifted their rates, I really wonder who they are. Can you tell me if any of the big 6 involved (well as least not RBC and BMO)? Or are they secondary FIs or even smaller players out there? I really wish rates are going to stay low for a little longer as my mortgage renewal is coming up later in the year…

  17. Scotia has matched the posted rate drop (5.25%). And has also lowered their 5 year discounted rate to 3.79%.

  18. > Julie
    None of the largest banks raised rates but a number of independent lenders did. Rob can probably comment better but it looks like nothing more than a short term strategy to make the headlines and gain market share.

  19. I just locked in at 3.69, and am glad to be worry-free for 5 years. Cost certainty is worth it, at this point. All this speculation on interest rates was giving me a headache!

  20. This offer applies to posted rates only. With 5,39% on 5-year fixed doesn’t make any sense (compared to 3.69 that you can get from mortgage brokers).

  21. Hi — I asked CIBC about a 4-year cash back mortgage and was offered a fixed rate of 3.64% that they were willing to extend to 5 years. We’re currently at 4.19% fixed. Would I be crazy to consider taking a 2.05% variable rate mortgage also available, even with rates set to rise over the next 5 years?

  22. I have been following the rate bulletins here for 2 years and they have been bang on. (Thanks to Melanie & Rob) This is the first time I remember that discount fixed rates did not go up after yields had a big rise.

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