Brokers aren’t worried about big bank rate cuts

It’s all ado about nothing, according to brokers who don’t believe the big bank’s rate cuts warrant all the media coverage they’re getting, after two big banks make record rate moves.

It’s all ado about nothing, according to brokers who don’t believe the big bank’s rate cuts warrant all the media coverage they’re getting, after two big banks make record rate moves.

“I’m already offering clients better than that; for a long time I’ve been offering much better than that. With the Government Issue, it’s basically free competition, so [the banks] can offer whatever they want,” Jerry Schindelheim of Invis MI told MortgageBrokerNews.ca. “I don’t think it will stimulate the economy too much … I don’t think these rate cuts will increase sales. Clients shouldn’t be in the market if they can’t afford the rates prior to the rate cut.”

The Bank of Montreal made headlines Monday when it slashed its five-year fixed-rate mortgage to 2.79 per cent from its previous mark of 2.99 per cent.

TD Bank quickly followed Wednesday by matching the rate.

Earlier this month, CIBC kicked off the fracas by offering a promotional 1.99 per cent four-year fixed for the first nine months before rising to 2.83 per cent.

BMO, of course, is famous for drawing the ire of regulators with its bold mortgage price slashing, doing so on several occasions in previous years.

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And while the timing may seem suspect, with several industry organizations warning about an overheated market, brokers don’t believe the rate slashes – and furious media coverage – will have too much of an effect.

 “No, I don’t think it will contribute to overheating the market. Rates have been so low for so long and 2.79 per cent isn’t even the lowest rate in the market right now,” Angelo Lograno of Premier Mortgage Centre told MortgageBrokerNews.ca. “I think we’ve been up and down this road before for the last seven or eight years … it’s not going to change the debt structure; it may alleviate some interest cost to a client.”

But are regulators keeping a close eye? Not as close as they may have in the past.

“We constantly reinforce that it is the banks themselves that determine the risks they want to assume, risks they must subsequently measure, monitor and manage,” Jeremy Rudin, head of Office of the Superintendent of Financial Institutions (OSFI), said in a prepared speech to the International Finance Club of Montreal.