BMO, Scotiabank Join RBC in Quietly Reducing Mortgage Rates, Financial Post

This article appeared in the Financial Post on January 22nd, 2014.

TORONTO — At least three more big Canadian banks have joined Royal Bank in quieting reducing some of their mortgage rates.

Bank of Montreal, Scotiabank and TD Canada Trust all lowered rates this week. Like RBC, none issued a news release announcing the changes. For example, Scotiabank lowered its five-year closed fixed term mortgage 10 basis points to 3.49% on its website Tuesday, down from 3.59% posted on the site Monday.

BMO, meanwhile, lowered a number of its rates between 10 and 20 basis points, including its posted five-year fixed rate to 3.69% from 3.89%, according to Ratehub.ca.

The changes, first reported by the Business in Canada website, follow a move on the weekend by RBC to quietly lower its rates on several fixed-rate mortgages by 10 basis points, bringing its five-year closed rate to 3.69%.

TD followed suit on Wednesday and now has a posted discounted rate of 3.69% for its five-year fixed mortgages, down from the rate of 3.79% that had been in effect since August. The bank has also made changes to several of its other closed rates.

RBC said in an email Monday that it was only matching lower rates offered by other financial institutions.

“Competitors have been pricing at lower rates for several weeks and this rate change now puts us in line,” the bank said.

Battling between banks lowered rates to 2.99% for a five-year fixed-rate mortgage last year, a percentage that drew the ire of Jim Flaherty, the finance minister. At that rate, the banks were barely above discounters.

Discounters still have an edge heading into the spring market, as banks have been reluctant to pass on all of the savings in the bond market.

One might say we are entering a busier period for home buying so we will see a more competitive marketplace [in 2014]

Jim Murphy, chief executive of the Canadian Association of Accredited Mortgage Professionals, said 2013 turned out to be a major year for discounting with the average consumer saving 2.12 percentage on points on a five-year closed fixed-rate mortgage. The average rate for that term was 3.06% while average posted rate for the term was 5.21% in 2013.

“One might say we are entering a busier period for home buying so we will see a more competitive marketplace [in 2014],” Mr. Murphy said.

The other issue for some lenders is trying to make up for ground lost because of skinny margins in 2013, said Wade Stayzer, vice-president of retail and investment services of Meridian, the largest credit union in Ontario.

A shrinking market for housing sales could put its own pressure on the market. “Corporate targets don’t drop when financial forecasts drop. Everybody is out chasing the same mortgage,” said Mr. Stayzer.