Monolines to cash in?

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The recent Bank of Canada cut has opened up a great opportunity for monolines, but will they cease it?

“TD has already dropped their rates by 10 basis points, so monolines can’t get ahead (of them),” Dustan Woodhouse of Dominion Lending Centres Canadian Mortgage Experts told “It’s a great opportunity for one lender to cut an additional five basis points.”

Woodhouse does admit, however, that a mere five basis point slash won’t draw a great deal of business to one lender because the markets are so busy. He also expects most lenders to follow TD’s lead in the coming days. Some, including RBC, BMO and CIBC already moved to slash their own by 15 basis points Wednesday afternoon.

It’s a viewed shared by Mark Cashin of Verico Cashin Mortgages, who believes there is room for lenders to go even lower.

“I think there is room for rates to go down even more,” he said. “The economy is fragile in Canada and offshore; I think the banks will bring it down past that 10 basis points now that TD has done it."

“The others may see it as an opportunity to win clients.”

The Bank of Canada announced Wednesday that has cut its overnight rate target to ½ per cent, citing lower-than-expected economic growth.

“The Bank’s estimate of growth in Canada in 2015 has been marked down considerably from its April projection,” the central bank said in a release. “The downward revision reflects further downgrades of business investment plans in the energy sector, as well as weaker-than-expected exports of non-energy commodities and non-commodities.  Real GDP is now projected to have contracted modestly in the first half of the year, resulting in higher excess capacity and additional downward pressure on inflation.”

And it’s good news for the industry, according to Cashin.

“I think it’s great for people with mortgages and it’s good for us,” Cashin said. “We’re in the business of lending money and if we can lend for cheaper today than we did yesterday it gives us a good excuse to call clients.”
  • Jake Abramowicz on 2015-07-16 9:55:42 AM

    First of all it is seize not cease.

    Second - how can the headline ask if Monolines are ready to cash in then the first comment from Dustan says they can't, since their Prime rates are linked to the big banks?

  • Ernie MacDonald on 2015-07-16 10:34:31 AM

    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. Am I the only one that is mad about this!!! The BOC dropped the over night rate to help boost the economy, and the banking industry as a whole has kept 40% of it for them selves. Last time I looked the banks weren't hurting, but the economy is. A little backlash and bad press may get the banks to pass on the entire 25 bp drop the their clients. Lets get talking about this!!!!

  • Debbie on 2015-07-16 10:43:50 AM

    I agree Ernie. Greedy banks are still making record breaking profits even in this tough time. Mortgage rates this low and still making money off them. I agree they have to profit, but they would still make money if they followed the BoC.

  • Ernie MacDonald on 2015-07-16 10:48:09 AM

    Thanks Debbie. You can be sure the banks will take the full increase when the BOC raises the overnight rate!

  • John Van Driel on 2015-07-16 11:03:06 AM

    Letters to National Post Editor, or Globe & Mail would work better. Here, you're preaching to the choir!!

  • Jesse D on 2015-07-16 11:49:02 AM

    Hopefully, 1 lender will opt to drop the full amount, forcing the rest to do the same. It is unfortunate the banks are trying to make more money off this move but that's why they are in business, not to help people but to make money.
    It would be nice if the qualifying rate drops enabling more potential VRM clients to get in on it.

  • Ron Butler on 2015-07-16 12:35:03 PM

    Nobody dropped the full amount last time no one will drop the full amount this time.

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