One broker believes the big banks are skimming off the top of the Bank of Canada’s recent rate cut.
“Why is no one talking about the fact that the Bank of Canada has cut it overnight rate by 50 bps in 2015, and the banks and mortgage lenders have only passed on 30 bps to the clients?” Ernie MacDonald of Mortgage Intelligence
wrote on MortgageBrokerNews.ca. “Am I the only one that is mad about this? The BoC dropped the overnight rate to help boost the economy, and the banking industry as a whole has kept 40 per cent of it for themselves.”
The bank of Canada once again cut its overnight rate by a quarter per cent to ½ per cent on Wednesday and the banks quickly followed by lowering their prime interest rates. Albeit, by a smaller margin than the Bank of Canada rate slash.
TD Bank was the first to act by lowering its prime rate by 10 basis points; CIBC, BMO, and RBC followed with 15 bps cuts of their own.
It was a trend set in January, following the first Bank of Canada rate change in over four years.
After both 25 basis point cuts by the Bank of Canada, the banks followed with a maximum cut of 15 basis points.
And it has some wondering if the same would apply if rates went the other way.
“The real question I have not heard the answer to is this: When rates return upward will the hikes by lenders match the Bank of Canada increases, or will the match exactly the reductions?” Dustan Woodhouse
of Dominion Lending Centres
Canadian Mortgage Experts told MortgageBrokerNews.ca. “