RBC has cut its 1 to 10-year fixed rates by 0.10 percentage points—effective tomorrow.
Its new 5-year posted rate is 5.89%, while its “special offer” rate is now 4.49%.
This move should compel the other big banks to follow. It should also reduce the industry’s benchmark qualifying rate to ~5.89% from today’s 5.99%. (The qualifying rate change would not take effect until Monday, July 5.)
RBC announced no changes to its variable rates.
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June 25 Update: BMO and TD have followed in RBC's footsteps by cutting most of their fixed rates 10 basis points. BMO's "low frills," 5-year fixed mortgage is now at 4.15%. As usual, full-featured mortgages are available at even lower rates through the broker channel.
Last modified: April 26, 2014
I cannot believe how slow and small the increments are at lowering fixed rates, considering how low the bond yields are and a cooling housing market. Quick to rise and slow to go down….just like gas companies i guess! Bring on more record profits!!!
The 5-year bond yield has been hovering the 2.50% range for some time now. And yet financial institutions have been reluctant to give back to borrowers. The spread between the 5-year bond and the banks’ “special offer” rate is >200bp. Back in March I was offering clients 3.69%. Now it’s around 4.25%. The banks were quick to raise their posted by 1% over a one month period and are now giving back 10bp or 15bp at a time over the course of months.
Back in March lenders were willing to take a significant cut on their margin in anticipation of a strong spring real estate market coupled with borrowers rushing to lock rates before the Bank of Canada raise its benchmark rate. But now that the real estate market is cooling and things remain stagnant in the U.S., looks like lenders over here aren’t willing to compromise on their margins so easily.
The CAD 5-yr bond yield has now hit 2.35%, its lowest in well over a year!
Even if they want to preserve a 200bps profit spread, shouldn’t we be seeing posted rates below 5.50%? It’s ridiculous they’re still in the 5.80’s … what do you guys think?