Kamloops Real Estate Blog

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.

This article appeared on the Globe and Mail‘s website on January 20th, 2014 and was written by Tara Perkins.

Royal Bank of Canada, the country’s largest mortgage lender, has quietly cut some of its mortgage rates this weekend. The move appears to be part of a broader dip in rates, although economists generally still expect an increase in 2014.

Five-year fixed mortgage rates rose industry-wide for much of 2013, from their low of 2.64 per cent in April to their high of 3.39 per cent in September, according to Alyssa Richard, the chief executive officer of RateHub.ca. They edged down a bit later in the fall but had generally been steady at around 3.25 per cent since then.

RBC is now cutting its two-, three-, four– and five-year fixed mortgage rates each by 10 basis points. In an emailed statement, the bank said that some mortgage lenders have recently been pricing at lower rates, prompting it to move.

Royal Bank is often a price leader when it comes to mortgages, and other big banks frequently follow suit after it changes its prices. Its five-year fixed mortgage rate is now 3.69 per cent.

Mortgage prices tend to follow changes in five-year government bond yields because of the impact that those yields have on banks’ funding costs. The yield on five-year government of Canada bonds has fallen from 1.95 per cent on December 31st to 1.71 per cent on January 16th, according to Bank of Canada data, although it fluctuated during that time.

Canadian bond yields tend to follow U.S. bond yields. Yields began rising last May after U.S. employment numbers came in much better than expected, raising hopes for the U.S. economy. Then they shot up further after U.S. Federal Reserve chairman Ben Bernanke suggested the central bank could start tapering its asset-buying program, a signal that he thought the economy’s health was improving.

While the U.S. central bank has begun tapering, December jobs numbers and some other recent data have been disappointing, and caused bond yields to fall.

Most economists still expect that both yields and mortgage rates will tick up gradually through 2014, as the U.S. economy improves and the central bank continues to back off of its asset-buying program, known as quantitative easing.

But as Ms. Richard points out, it is possible that the U.S. economy will prove to be weaker than expected, and that could result in further decreases in bond yields and mortgage rates.

Royal Bank of Canada, which normally issues a press release when it changes its mortgage rates, made this move quietly, simply posting the new rates on its site. The news was reported this weekend by the blog Canadian Mortgage Trends.

Bank of Montreal dropped its five-year rate to 2.99 per cent early last year, spurring a price battle that angered Finance Minister Jim Flaherty. Mr. Flaherty has taken numerous steps, such as tightening the mortgage insurance rules, to prevent consumers from taking on too much mortgage debt. Policy-makers have been trying to warn consumers that, at some point, rates will rise.