Banks are avoiding what appears to be a looming rate war by sticking to five-year fixed rates at or around 3.09 per cent even as other lenders race toward 2.84 per cent.
“Banks are keeping to their rates because to them anything other than profit is irrelevant,” said James Robinson, a Toronto agent with the Mortgage Centre. “ING is offering 2.99 per cent on fixed five-year terms for their top-tier clients, but pretty much everyone else, including mono-lines, is offering around 3.09 per cent.”
A quick check of the Big Five’s websites Monday reveals that officially, at least, BMO is offering 3.29 per cent, CIBC, a special rate of 3.94 per cent, and Scotiabank, 3.99 per cent. TD and RBC have no official discount on their respective five-year fixed product, now at 5.24 per cent.
However, those advertised rates are likely quite removed from what clients are finding in the branches, said Ad Lakhanpal, an Oakville-based broker with Mortgage Alliance.
“TD is offering us 3.39 per cent on their fixed five-year term,” he told MortgageBrokerNews.ca. “But they can offer lower rates through their own channel or to their walk-in clients.”
Current bond yields suggest the banks still have room to lower their rates.
“The recent high demand for the Canadian dollar will further lower bond yields so we can expect the mortgage rates to stay down,” said Lakhanpal, anticipating bank rates will eventually dip lower. “Rates will likely go down to less than 3 per cent.”
Rate rivalry among lenders appeared to heat up last Thursday when Xceed began offering clients 2.84 per cent on its five-year fixed mortgage. The reduced rate is being offered until Aug. 31.
The reduction came at a time when the industry is seeing an increasing number of lenders offering 2.99 per cent on a five-year term. For example, True North Mortgage also recently dropped its best five-year rate to 2.89 per cent.
The Web site Ratehub.ca lists the lowest five-year fixed term at 2.89 per cent as of today.
Some industry experts believe the banks are holding back to appease the government in its drive to curb household debt and discourage vulnerable consumers from taking on housing debt they can’t afford.
Also S&P downgraded its outlook on several Canadian banks from “stable” to “negative.” Those downgraded were RBC, TD, Scotiabank, National Bank of Canada, Laurentian, Central 1 Credit Union and Home Capital Group.
"The current mix of international and domestic macroeconomic conditions could bring about a rising level of unemployment and further constrain income growth for Canadian workers," S&P warned last Friday. "These developments may potentially impair consumers' debt servicing capacity and amplify Canada's vulnerability to a housing market correction at some point in the future.”