We could be in for a slow summer in the mortgage market, thanks to housing moderation and mortgage rule tightening over the last 12 months. This may have contributed to TD’s and RBC’s decisions this week to chop their advertised 5-year fixed rates.
Those rates are now down to 3.09% — the lowest we’ve ever seen posted on their websites. They’re also just 10 basis points above the 2.99% mark, a level that raised the hackles of Finance Minister Jim Flaherty in March.
RBC, the nation’s biggest mortgage lender, and TD have rarely been this aggressive on public mortgage pricing. Like most big banks, they usually do most of their discounting behind the scenes with “discretionary rates.” But consumers have never been so rate sensitive, so both lenders want to appear like they’re in the game (which they are).
RBC’s 3.09% offer “expires” June 30 but it can be extended or withdrawn at any time. RBC also has new 4-, 7- and 10-year rate “specials“. TD doesn’t post expiration dates for its specials, but they too can change at any time.
Pricing aside, RBC continues to make veiled references to the limitations of BMO’s 3.09% “Low Rate” product…in ads like this…
BMO has led the Big 6 on advertised 5-year fixed pricing for three years now. The other banks are finally getting motivated enough (in the face of flagging mortgage volumes) to match BMO.
Now we’ll watch to see if BMO responds by advertising its own fully-featured 5-year mortgage at the same 3.09% rate.
(Note: All the banks have been selling 5-year rates well below 2.99% for weeks already — through their branches and mobile sales forces. They just haven’t advertised low rates as conspicuously as they are now, on a national basis.)
Rob McLister, CMT
Last modified: April 26, 2014
Why do they bother with the exercise in the first place? The banks are “down and dirty”, in the trenches with mortgage brokers with very competitive rates. It seems the whole “public” rate is a smoke screen to appease Mr. Flaherty ,who is under the illusion that we don’t see behind it.
RBC press release today…
RBC Royal Bank changes residential mortgage rates
TORONTO, June 7, 2013 /CNW/ – RBC Royal Bank announced today that it is increasing its residential mortgage rate offers effective June 10, 2013.
The changes are as follows:
Special Offer Rates*
Four-year closed 3.09 per cen (increased by 0.10 per cent)
Five-year closed 3.29 per cent (increased by 0.20 per cent)
Great news for the consumer.
The bank’s historical used car mentality “let me talk to my manager, and see what I can do for you Mr Chump” is so disrespectful to the public.
Not that this doesn’t / won’t still happen, but at least pretending they are generously giving some big “1 plus % discount off their “rates”, when they give the lower rate to anyone who asks ( and dont, if they dont)is more transparent with listed rates closer to the negotiated rates.
Well this party didn’t last long did it? :)
Amazing what 95,000 new Canadian jobs and some U.S. optimism will do to funding costs.
At what point will posted rates, as determined by the Bank of Canada, start to reflect the reality of the market? They update the estimates each week (“as of Wednesday”).
I think I recall reading that the average discount is 2.2% off posted rates. Maybe the banks figure they’re not fooling anyone anymore, so what is the point of advertising misleading rates.
They are the biggest,
they do what they want
and everyone else follows
I wonder if they only chopped their rates so that they could create news by “raising” their rates one day later, hence keeping Jim Flaherty happy.
Though in reality the rates they are now posting, 3.29 (increased by 0.20%) is only back to where it probably was a few days ago.
Has anyone heard anything about RBC’s rate match program? Maybe they will roll it out nationwide now that rates are going up.
Actually RBC has gone even lower with their rates. They run a radio commercial promoting 2.99%. The commercial itself is naive and even funny.
Read more here…
http://recommendedbroker.ca/blog/2013/06/the-rbc-mortgage-rate-lame-commercial/
If banks lowered posted rates to reflect the market they couldn’t screw people anymore with high penalties and crazy cash back rates. I don’t see that happening.
How would the qualifying rate be set if there were no posted rates? The Department of Finance probably doesn’t want the banks to reduce posted rates.