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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

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