At long last we have a Big 6 Bank lowering advertised fixed rates.
RBC trimmed its 5-year posted rate to 5.34% today. It’s the first drop in posted rates in 16 weeks.
The move coincides with falling bond yields. The 5-year government yield has tumbled 30 bps in the last month, reducing fixed-rate funding costs throughout the industry.
Other banks will likely follow RBC’s lead and cut their own rates—with the exception of Scotiabank. Scotia’s 4.99% 5-year posted rate has undercut the other major banks for weeks.
Rob McLister, CMT
Who cares about the posted rate? Only the bank itself, since they use that inflated rate to calculate your penalty later on.
Don’t borrow from banks with posted rates, their IRD will ruin you if you need to break the mortgage.
When posted rate drops, the 5 yr discounted rate also falls.
Well said, VanBroker. I work in a bank branch and I was thinking the same thing – that seems about all it’s good for! :)
What, interest rates going down? This can’t be true. Garth Turner says interest rates are going up and he’s never been wrong.
What? Could prime then possibly go down even more? Maybe variable way to go?
“Who cares about the posted rate?”
Posted is what qualifying rates are based on.
Posted is also used for speciality products like cashback and capped variables.
In addition, like RBC Spec alluded to, when posted rate changes so does unpublished pricing.
Thanks for the reply TO. Your comment confirms what I was alluding to – why is there unpublished pricing in the first place? To confuse and fleece your customers as often as possible? Why not advertise your best rate all the time?
I know coercive-tied-selling is not allowed, “but if you bring us your mutual funds/rrsps/insurance/credit card balances we’ll give you an extra 50bps off our posted rate”… etc.
Here is alittle background on Posted rates that you may not know?
Banks are federally regulated lenders whom offer mortgages in remote locations and property types that a lot of Finance Companies, credit unions and Alt A lenders wont touch. For example a mobile home on Leased land in a remote community.
Banks will also right deals that they cannot re-sell as MBS like sub 600 Beacon scores and may add risk based pricing as the mortgage must stay on their own book. Another one is mortgages over $2M can no longer be bundled in most securitization products and as ALT lenders have mortgage ceilings a bank may write it and may not get discounted to the same level as other mortages with lower funding costs.
As for your tied selling reference… That is called business and happens in every industry. Shoe store sell you the second pair of shoes for half off, and almost evry company has loyalt points and rewards what is the difference?
Be careful what you wish for as if rate negotiating becomes simpler than alot of brokers will be out of the job! Mortgages are enough of a commodity as it is and packaging deals and negotiating is what keeps us in business!
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