RBC and TD Compete a Little Harder

rates-discountingWith the exception of BMO, major banks have refused to advertise reasonable 5-year fixed rates (3.09% or less by today’s standards).

But that changed last week when both Royal Bank and TD Canada Trust dropped their rates to 3.29% on a 5-year fixed. As best we can tell, that’s the lowest 5-year fixed rate that either have ever advertised on their websites.

The rate itself is nothing to write home about. You can easily find 2.99% online. Moreover, both banks have been selling lower discretionary rates for weeks. The question is, does this extra “discounting” signify a strategy change?

It’s tempting to believe that banks are finally “getting it.” In other words, they’re realizing that advertising silly 5-year rates like 3.99% doesn’t work anymore. Such rates certainly do nothing to attract well-qualified borrowers.

Without a doubt, the bank powers that be are noticing elevating competition—which is one reason we’re certain they’ll get more aggressive on advertised rates over time.

But if that is indeed bank thinking, they sure don’t want people to know about it. Neither RBC nor TD issued press releases on these discounts, possibly because shareholders or Papa Flaherty are watching.

competition-and mortgage-rates

Unfortunately, it’s very possible that these 5-year rates are just short term promotions, like the 2.99% four-year fixed promos banks offered last January. We’ll see what RBC does after its 5-year “special offer” expires January 31.

For now, the mortgage market has slowed noticeably thanks to government rule tightening and general seasonality. The last thing most lenders want is to lose precious profitable market share by advertising out-of-the-ballpark rates.

And one last note: In speaking with four bank reps last week (an admittedly non-representative sample), it seems some are getting beat up on rates. Interestingly, one was planning her move from the bank channel to the broker channel, simply to access better pricing.

On that note, if you’re a bank rep considering a broker career solely to get better rates, think carefully. Brokers may have the price advantage currently, but banks (and some large credit unions) have the deepest funding sources long-term.


Rob McLister, CMT

  1. I am a bank mtg advisor. Not sure why the bank rep mentioned above is not able to compete with brokers regarding pricing. I am able to price as any broker would

  2. Can someone tell me what the best 10 year rate is and how high interest rates would have to rise to make a 10 year a better choice than 3.99% 5 year?

  3. Best 10 year rate: About 3.79%
    Breakeven 5 year rate: About 2% higher than today
    In other words, if 5 year rates are less than 5% in five years, you’ll probably do better with a 5 year fixed.

  4. I wouldn’t leave a bank just to get better rates, but I would leave to get wider access to products. Customers are all different. You meet fewer needs selling just Volvo’s than you do selling BMWs, Jeeps, Jaguars and Hondas.

  5. Just saw the Tweet saying BofAML expects rates to decline this quarter … did you read that correctly?
    A major economic forecaster actually coming out with a prediction that interest rates will not rise, but fall.
    There’s something you don’t see every day.

  6. Who you kidding? Brokers rarely sell BMW’s, Jeeps, Jaguars and Honda’s. To use your analogy, brokers predominately sell Volvo’s and often for the same price as the banks.
    The #1 broker lender is Scotiabank peddling the exact same product your main street branch sells.

  7. Do you think banks are becoming more competitive because of the increase seen in the CMB program? Government making smaller lenders more competitive, so big banks have to drop rates, even if they don’t advertise?

  8. Only three of brokers’ top 10 lenders are major banks. There is also more discounting in the broker market. So I would disagree on both points.

  9. Actually jim, you wrong on both points. Five, of the top ten broker lenders are banks/bank owned(ING) and as for discounting, the banks successfully compete on rates every single day.

  10. Try again. I said “major banks.”
    ING is not a major bank.
    Since you brought up ING, don’t forget that ING has better products than any other bank.
    Too bad that bank reps are one trick ponies who can’t sell mortgages from ING and others.
    You say that banks complete on rates. That depends what your definition of compete is. The average bank customer is lucky if they’re quoted 3.19%.

  11. “ING has better products than any other bank”
    Really, then sign me up for a ING, 30yr. amortization, non-collateral mortgage, a interest only 3.5%HELOC and the lowest 5yr fixed mortgage rate available!
    What’s that I hear, crickets?

  12. I have always loved this quote “only 3 of brokers top 10 lenders are major banks”, then you go on to say that ING is not a major bank. So, considering that RBC, CIBC (Firstline), and BMO are not in the broker market, that leaves TD, Scotia, and National (of the rest of the schedule 1 banks that are considered the big 6) So, your statement of “only 3…” is misleading, as the broker market has access to only 3 of the major banks, by your definition,
    In all actuality, the phrase is “Big 5 Banks” and they are RBC, TD, Scotia, CIBC and BMO. So in effect yu only have access to 2 of the historical Canadian major banks, and they appear in the brokers top 10.
    I agree with banker, whole lotta talking about BMW’s, Jeeps, Jaguars, and Honda’s and a whole lotta Volvo selling for the most part.

  13. Bryan,
    I think you are reading to deep into it. The banks have been matching rates and customizing products to match the what is available on the market for years and years. The choice is just to not advertise the rate, but to make it available to their staff and sales teams. Yes, I work for a bank,as a mortgage specialist (have been in the bank system for over 10 years, and spent 6 years in the broker world as well), and I’ve been able to match or beat a lot of “broker” rates,

  14. Hmm, one trick pony, that’s original. I just say thank you, as I am proud to know that I am a knowledgable mortgage specialist, that probably knows more about the industry than you. I will also make sure that I provide our clients access to our whole financial team for PROPER financial planning and advise from other specialists (such as investment reps, financial planning advisors, business bankers) that do it for a living, all no cost to the client, and not act like a broker who THINKS they know what is best, but couldn’t come close to passing the CFP exam, Mutual Funds exam, or other financial licencing using their so called knowledge, other than the Mortgage agent exam,(which by the way is a complete joke, I browsed the book as bathroom reading and passed with over 90% score).
    Stop the woe is me, banks are bad attitude and realize that if the big 5 banks wanted to put the broker market out of business, they could within a 12 month time frame. The banks are not going away, no matter how much you try to lie about what they do.
    Oh yeah. almost forgot, I gave a client 2.89 today, a little lower than your ill-informed 3.19 and probably lower than what you would have offered.
    Have a nice day.

  15. Banks might match a lot of rates but they don’t match all rates. Right now there are few banks matching the best rates on Ratehub.

  16. It seems to me that whoever talks to the client last gets to be the lowest rate supplier to the client. It’s a race to the bottom in some case’s and some of you seem to think this is a good race to win. Nothing wrong with competition but supply the client with valuable guidence and hold the line on buying down the rate. It’s still nice to get paid for my time!

  17. If the race is to the bottom and you don’t try to win, what will you do for employment?
    Do you really think you can reverse the trend in buydowns? The genie is out of the bottle and there is no shoving it back in.

  18. why would you give 2.89 at RBC & take Min. comp of $300? great for the client but zero pay for you? thats the big diff. with Brokers & banks Brokers get paid 70-90 bps per deal, Bank Mortgage rep for RBC gen. 35-50 bps, TD 2.89, i can tell you 1. head office would never approve 2.89 right now not a chance 2. you get a no pay or min comp, which is basically nothing. too much rate, rate, rate…. 2.99-3.09 is the market why not keep it there & get paid.

  19. The rate was approved for the client so we would not lose the client to a competitor, which he had the commitment in hand and I have a copy of. This was not a pure rate play, or just discounting it for the sake of dicounting it. Unlike others, I am willing to sacrifice my commssion sometimes to ensure the client stays with me. I have already received 2 referrals from the client since his approval was completed and accpeted. The client knows his rate was a only time only exception, and I already have approvals in place for the referrals he sent me. So yes, I am getting paid the base commission on that deal, but am more than making it up in the referrals I have received.

  20. Your hubris will be your downfall.
    Your bank’s “financial team” doesn’t help people pick the best mortgage. They merely try to cross sell the customer inferior products with your bank’s name on them. Again, you and your team are a one trick pony.
    Financial planning is simple Arby.
    If you want the best mortgage, use an independent mortgage expert that presents the best choices from multiple providers.
    If you want the best insurance, use an independent insurance expert that presents the best choices from multiple providers.
    If you want the best mutual funds, use an independent mutual fund expert that presents the best choices from multiple providers.
    One trick bank ponies are not in a consumer’s best interest.
    PS….As much as you’d like us to believe it, most bankers do NOT extend the mortgage discounts you claim.

  21. “the broker market has access to only 3 of the major banks, by your definition”
    That is two more major banks and dozens more lenders than you have access to. Who gives their client more choice?
    What’s that I hear, crickets?
    (That line is inspired by Banker in an Ivory Tower. Thank you Banker.)

  22. Hi Arby,
    For what it’s worth, my personal experience is that there is no such thing as a one-time rate exception. Once consumers realize that unusual discounts are possible, they (very understandably) seek the same “deal” on every single renewal.
    A mortgage originator may get referrals by working for $300, but I find those rate-driven referrals often expect the same level of atypical discounting as the referrer received. It’s a cycle that can make it much harder to pay the bills as a mortgage professional. If taken to the extreme, it becomes a model dependent on “volume.” In that case, there’s a real risk of service levels suffering and the client connection being lost.
    True mortgage professionals want to give their clients the very best deal possible, but it gets really tough to win long-term by dipping below a certain minimum revenue per deal–especially when the exceptions start becoming the rule.
    Cheers…

  23. Thanks Rob,
    The whole conversation started when someone here stated “customer is lucky if they’re quoted 3.19%.” The rate and mortgage package that I am talking about was a competitive situation, that got approved for the pricing. By saying it’s a one off, I meant exactly that.At no time did I state anything about long term in this situation, nor did I say it was the best way to build business. Fortunately, we competed on the deal, got the deal and the client has sent me 2 referrals since then, and his mortgagae hasn’t even closed since then. The approvals I have in place for the referrals are one at 5 years, 2.99, and the other on a line of credit. Those clients are quite happy, as I provided full and complete service, disclosure to them, and we reviewed their personal situation. IF everyone reads carefully, at no time did I say this was the way to build a business, but to quote “bank offers” without knowing the pricing matrix or discretions is short sighted.
    Here’s a good quote. “A lot of people make a lot of statements about things they don’t know, but want to look like they know.” That’s not directed at you Rob, but rather at the post that started this whole conversation.

  24. Jim,
    Next time you present your client with more than one committment and let them pick the lender they want to go with, then you can talk about choice. In most instances,YOU are making the choice for the client. Look, I’ve been on the broker side, both as an agent and as a BDM, I know how it works. If 2 lenders are offering the same rate, and one of them is offering more comp to you, MOST brokers will get the approval from that lender, and provide that to the client. Nothing wrong with that, but to keep quoting “choice” becomes more of your misleading comments. Prove to us that you put at least 2 commitments before your clients regularly and they get to pick A or B, and at that time I will agree with you about choice. Until then, this statement doesn’t hold water.
    Thanks boys, you make my mornings fun…

  25. It’s always nice to hear an actual businessperson’s response to these questions: “minumum revenue per deal” it becomes a business equation free of emotion and recrimination. Either the mortgage originator can function with the revenue derived from the discounted rate or not.
    Refreshing.

  26. you are so correct Rob, gaining 3 more referrals & have to give them 2.89 for basically zero pay, what is the point? you get paid zero, then the service go to zero, why would you care when the client pounded you for rate. Never understood why someone like “arby” which is clearly RBC branch person or new Mortgage rep, would bother, what a complete waste of time. anytime I get pounded for rate, knowing full well my comp will be crushed, send it to a broker split the comp. at least you get paid some. good luck holding on to those “other deals” if they find out their friend got a better deal, those referrals will turn into cancelled deals.

  27. It is totally pointless to waste the client’s and lender’s time submitting multiple applications before the client even picks the lender. That is unrelated to brokers offering choice. Being from the broker side you should know that.
    Our clients always choose the lender and 95% of the time I know if the deal will be approved before I click “Submit.” Why ruin my efficiency ratios (which I use to get my clients better rates) by submitting apps that I know won’t close?

  28. Hey Jim,
    If “Our clients always choose the lender” what do they need you for?
    Most of the clients i work could not even name 15 mortgage companies let alone the products and rates they offer…
    Isn’t they whole premis of a broker to select the lender for the client based on the clients needs? If you cant get that step right, i do not see much success in your future.
    Honestly the majority of clients even those that do significant internet research must trust their Mortgage originators integrity to advise them in some part of the choice. With that there opens up a huge grey area for originators alike (Brokers,Bankers, Mobile reps)to stray from their feduciary duty in aid of their pocket book.
    Jim you make brokers look bad with gross over generalizations and over simplifications that you make above. Be honest… Clients choose the product you make sound the most appealing. This can happen for a variety of reasons not just comp!

  29. Hey Mortgage Pundits :)
    My mortgage is coming up for
    renewal in April.
    We had a 5 year variable
    closed at 2.15%
    My banker is offering me to
    renew for a 5 year fixed
    closed at 2.99%
    No plans to move.
    Any opinions?

  30. You can do better than 2.99% but it depends if you want to spend 5 hours of your life moving your mortgage, how big your mortgage is, if you can get approved elsewhere, if you like your current lender, if another lender has better terms for the same rate, if there are switching costs, etc etc
    Speak with a broker if you need help sorting it out.

  31. It’s not so much a matter of being smart. I like to think I’m smart, but I still don’t know how to find the best life insurance. I need an insurance broker who follows the market daily and knows the downfalls of every company.
    It’s more a matter of what you know and don’t know, and the latter can really hurt you.

  32. You appear to be twisting my statement.
    The answer to what value I provide clients is: lender and mortgage information, service and objective advice, all at no cost to my clients.
    The product I “make sound the most appealing” is the product I truly know is the best fit for my client’s needs, based on years of experience. Compensation never affects my advice unless the best two choices pay exactly the same and afford the same benefits to my client.
    If you have any experience in the broker industry, this should not be news to you. Why do you have to make the process sound so sinister? I’d argue the reverse, that what you are insinuating makes bank reps look bad.

  33. Dave, who’s offering the 3.79% 10-year rate? If after 5 years the fixed rate being offered is 5% for the next 5 years…. then it’s the same as the 10-year rate at 3.79%? Thanks in advance for your reply!

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