Brokers exhausted by this latest battle in the rate wars will have time to nurse their wounds, with the big banks suggesting they’ve put down their weapons for now, if never really for good.
"Some of those rate wars have taken these returns down to unacceptable levels for our shareholders," David McKay, RBC’s country head said at a Montreal conference Thursday. “You hate doing business at 2.99 and making such low-to-negligible margins for five years."
Execs at the other Big Six are now seconding that, following Thursday’s collective move to end three weeks of discounting that brought fixed rates to their lowest levels in decades at the same time it brought profit margins to their knees.
As it did in January, BMO fired the first shot in March’s battle, forcing banks and mono-lines to counter its 2.99 per cent on a five-year fixed.
Most competitors refused to match the term on BMO’s no-frills product, instead pegging the rate to four-year fully-loaded mortgages.
McKay suggests that the compromise did little to insulate RBC and others from the effects of margin cutting on the bottom line.
For brokers, it challenged attempts to retain clients and keep them from retreating to the familiarity of a big bank name coupled with exceptionally low rates.
Still, many were able to gain some ground even with a heavily armed competitor behind every bush.
“We as brokers were better prepared this time to explain the shortcomings of the BMO product and to get them into other better product,” Trent Glover, with Dominion Lending Centres Team Kehler, told MortgageBrokerNews.ca. “We did have some clients who were questioning the rates they had received, but we explained the limitations of the (stripped-down) BMO mortgage, and they understood.”