Missed opportunity for brokers?

Missed opportunity for brokers?

Missed opportunity for brokers? Update 28/1/15, 2p.m.: TD Bank has lowered its prime rate to 2.85 per cent effective January 28, according to its website. National Bank has also dropped its rate to 2.85 per cent, according to assistant vice president W. Mark Squire. National Bank's website, however, still lists three per cent as its prime rate -- and says it is current as of 2pm Thursday.

Update 29/1/15, 9:30a.m.: National Bank's website now shows the prime rate at 2.85 per cent, current as of 9am Thursday morning.

The big banks operating in the broker channel aren’t doing themselves any favours by refusing to drop their prime rates, despite some of their competitors already doing so.

At press time neither TD Bank nor National Bank had lowered their prime rates, despite the fact that both Scotia and RBC have done so. The lack of action will likely have brokers frustrated over the missed opportunity.

“If they’re not keeping with the other banks, especially RBC, they are definitely going to lose business,” Kent Farnsworth of Mortgage Alliance Simply Mortgages told MortgageBrokerNews.ca. “And the brokers who tend to utilize banks more than monolines are going to lose opportunities.”

RBC was the first to drop its prime lending rate to 2.85 per cent, a 0.15 per cent cut and Scotiabank quickly followed suit.

"We believe our announcement is a balanced approach which reflects our actual cost of funds and helps clients save money on products such as variable-rate mortgages, lines of credit and floating-rate loans," RBC said in a statement, according to the CBC. "Our decision was driven by a number of factors, including our wholesale funding costs, the competitive, operating and macroeconomic environments, and the Bank of Canada’s recent rate decision and its impact on other market rates across the yield curve."

The cuts come a week after the Bank of Canada slashed its overnight rate to ¾ per cent from its long-held benchmark of one per cent.

“The Bank of Canada today announced that it is lowering its target for the overnight rate by one-quarter of one percentage point to 3/4 per cent. The Bank Rate is correspondingly 1 per cent and the deposit rate is 1/2 per cent,” the Bank of Canada wrote in its official release. “This decision is in response to the recent sharp drop in oil prices, which will be negative for growth and underlying inflation in Canada.”
  • Broker 2015-01-28 11:21:29 AM
    Banks need to be forced to drop Prime to 2.75%. I say this for the sake of Prime rates future. If BOC reduces rates by .25% and the banks only cut by .15%, what do you think they will do when Prime rate goes up? Prime will jump .25% at some point and you know the banks will jump at the chance to increase prime the full .25% as well. Furthermore, the bank's have now created TWO prime rates. One for investments (Prime is 2.75%) and one for mortgages (Prime is 2.85%). This is only going to cause confusion in the market and is unfair to everybody.
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  • Daryl French 2015-01-28 12:25:27 PM
    So do we want more control from the government, or do we want to allow the market to set rates? I've always been a supporter of less government more capitalism, careful what you ask for.
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  • Todd 2015-01-28 12:58:09 PM
    Your investments aren't receiving 2.75%, so there is confusion already. Talk to your bank. I know I will be having a conversation with mine if it has not been lowered to at least 2.85% by next week. I will take my HELOC and move somewhere where the rate is better, along with my bank acct.
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