Major banks announce cuts to mortgage rates

Five of the big chartered banks are lowering fixed term mortgage rates, and the rest are expected to follow, as bond yields go up creating easing conditions.

CTV National News: Richard Madan on the decline

A new report by the Canadian Real Estate Association finds that national housing sales were down by 30 per cent in June, compared to a year ago. Experts say the drop was due largely to a decline in demand in Ontario and B.C. due to the HST on new homes.

CTV British Columbia: Maria Weisgarber reports

Nationwide housing sales sank last month compared to this time last year. Declines home sales in B.C. are being blamed on the HST, but some say there's more at play. Maria Weisgarber reports.

CTV News Channel: Amparo Cardenas, broker

A mortgage broker with the Canadian mortgage brokerage firm, Invis, says the 30 per cent drop is a short-term adjustment and several factors led to the housing slump including mortgage regulations and the HST, while also saying home sales peaked before spring and summer.

CTV News Channel: BNN's Michael Hainsworth

A BNN correspondent says rising interest rates and HST caused home prices to fall and new listings are down, while also saying once housing prices are corrected the price of a home will rise on par with the cost of inflation.

CTV News Channel: BNN's Brett Harris explains

Many people were trying to beat the HST earlier this year by buying a home, but TD Bank is predicting another 10 per cent drop in home sales. The good news is the Royal Bank has dropped its mortgage rate for the second time since August.

CTV News Channel: Peter Kinch, consultant

A mortgage consultant with the Dominion Lending Centres says the current sales activity was predictable, and buying spikes based on things like HST were unfounded.

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A 'For Sale,' sign is displayed outside a home in Springfield, Ill., July 15, 2010. (AP / Seth Perlman)

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CTV.ca News Staff

Date: Tue. Aug. 17 2010 9:51 PM ET

One day after a report showed Canadian housing sales were down 30 per cent, most major banks announced they were cutting mortgage rates.

Most banks trimmed mortgage rated by one tenth of a percentage point, effective Tuesday morning.

The move brings the five-year closed rate down to 5.49 per cent.

"Pretty much across the board, fixed current rates are coming down by about a tenth of a percentage point," said BNN's Michael Kane.

"The Royal Bank of Canada, which is the largest, kicked things off yesterday with the announcement and it was followed by CIBC, Scotia, pretty much everyone except National Bank and TD. But generally speaking they will probably make their announcements today."

The move doesn't affect the one-year closed rate for mortgages, which is holding steady at 3.30 per cent at most institutions.

Kane said the reduction of mortgage rates is linked to the shifting bond market.

"The bond market is where banks finance their mortgages and so with bond prices going up and bond yields or the interest rates they pay coming down, that creates easing conditions so the charter banks can give you a bit of a break," he told CTV's Canada AM.

Housing sales fall in Canada

Meanwhile a report on Monday from the Canadian Real Estate Association showed housing sales dropped by 30 per cent nationwide last month, largely due to a new tax in British Columbia and Ontario that experts say deterred home buyers in two of the country's hottest housing markets.

The association reported a 6.8 per cent drop in home sales through its MLS service, compared with June numbers. The decline is part of a gradual dampening of Canada's once-booming real estate market.

B.C. and Ontario accounted for roughly 85 per cent of the slump, as the implementation of the harmonized sales tax this summer pushed many home buyers to purchase earlier this year, the association said in a statement.

The two provinces typically represent more than half of the country's sales.

Comments are now closed for this story

RANDY FROM CHATHAM
said

I LIVE IN SOUTHWESTERN ONTARIO, WE NEED THE BANKS TO LOWER YET MORE.OUR LOCAL ECONOMY HAS NOT RECOVERED FROM THIS CURRENT RECESSION.I BELIEVE OUR AREA IS IN A DEPRESSION NOT RECESSION. WE NEED ALL THE HELP WE CAN RECEIVE.EITHER FROM BANKS ,GOV'T, NEW INVESTMENT ETC.I AGREE THE BANKS CAN DO MORE. CUT THE FEES. DO NOT CHARGE THE POOR ALL THESE FEES.HST WAS THE STRAW THE BROKE THE CAMELS BACK.YET THE BANKS MAKE THIER BILLONS, AND THEY WANT MORE. OUR GOV'T SHOULD LOOK AT THE FEES THE BANKS CHARGE US ALL.

Ricardo
said

My mortgage is coming up for renewal with CIBC, and I find that the fixed rate of 5.65% is simply ludicrous. What is my best bet when I come to renegotiate? I don't know if I shouldn't just sell the house and move my lovely wife and 1-yearl old daughter into a nice 4' x 4' x 6' empty refrigerator box. That's what our economists are are driving the average family towards; financial ruin! Sorry if I sound bitter.

Greg
said

Wait until the housing market crashes here like it did in the states. Yes, it is coming soon. Look out, it's not going to be pretty!

Connie
said

For me in my city - as much as I would LOVE to buy a different house - my current residence has not recovered from the dive that it took when the markets went down. No one is talking about houses recovering to a point where people can sell them. The mortgage rate is the same as when I bought my house...I am not interested in buying when my rate isn't going to go down either. I will stay put...I think I am living in my future revenue property.

Calgary Owner
said

Why are people so quick to go to their banks for a mortgage? The banks are out to make money, like everyone else. When I went to my bank (back in 2008) TD Canada Trust told me to come back when I had $50,000 saved for a down payment. They were offering 6.25 percent on a five year fixed mortgage. I waited a year, and in the mean time I looked at what the mortgage brokers were offering. I ended up getting a rate of 4.29 percent on a five year fixed in 2009. I went with a broker called Jencor in Calgary. The lowest rates were still to come. I pulled the trigger a little early. My lender was offering 3.89 percent on a five year fixed by the middle of 2009. That was when rates had hit rock bottom.Right now, they are offering 4.19 percent. The big banks on the other hand are offering 4.90 percent...Moral of the story? Shop around. Don't listen when your bank tells you how it's gonna be. Find out what others are willing to do for you.

waynestunes
said

One tenth--- Wow I'm sure this is going to stop the needle from bursting the bubble ----not enough for sure.

unkonwn
said

haha maybe if people would actually pay their mortgages and not let banks forclose on their houses... maybe the banks could keep the rates lower... but there is always idiots out there that bite off more then they can chew. And if you invest wisley... lock your money in... instead of letting it sit there in a regular savings account or GIC you will get a great return.. ususally over the span of the investment about 10% back.. which is far more then anyone is paying for a mtg rate... maybe you people should go and talk to your bank before you start getting mad about it.... there are things you can do if you arent stupid with your money...

Casey from Ottawa
said

"accountant in BC

WOW!!! A stunning 1/10 of 1% rate reduction. Lets see what this saves the home buyer. A $300,000 mortgage for 5 year term over 25 years amortization and going from 5% to 4.99% will save you ... are you sitting down for this? ... $1.70 less per payment based on a monthly payment and a whopping $144.20 over the 5 year term. Thanks for the free large double double once a month.
"

I guess the Accountants in BC didn't realize that 1/10 of 1% (aka: 10 Bps) would make it 4.90% instead of 5.00%. Probably might want to double-check the math first.

On a different note - You can get a variable rate mortgage at rates below what the annual dividend of a bank is paying. So if you own your home - you could play dividen/interest arbitrage and mortgage your house and buy the bank shares. You'll make more money on the dividends than you will pay in interest = profit.

Just a thought to those who are complaining.

Westerner
said

Wow - last month my so called variable loan on my Mortgage that I locked in for 5 years had jumped up from the prior payout balance by a staggering $700.00 (June to July - checked at end of Month). This was lower the month prior ( June by phone in the conformation to the telephone banking number supplied by the bank which is connected to my account - this recent call confirmed that the principle principle payout was lower the month before - please note I keep a record of my payout Monthly in a journal! That's how they are ADJUSTING your ACTUAL initial LOAN you signed - I call it "cooking the books".

mortgage broker calgary
said

RE accountant in BC..............
1/10th of 1% would take it from 5%to 4.90 not 4.99 which would be 1/100th of a percent. The bank have dropped their posted rate from 5.99 down to 5.49 over the last 2 months. So as it may seem that this recent drop doesnt seem like much they have been reducing the rate maybe without you ever noticing. As another mortgage broker has stated these rates are the banks posted rates and we as mortgage brokers can usually get up to 1.5% of the posted rates. Go talk to a mortgage broker before making any decision, as the big bank will start with the posted rate and then drop it as the customer pushes back. so at the end of the day, yes the posted rate may be 5.49% today but mortgage brokers should be able to offer you around 3.99% today on a 5 year fixed. hope this helps. thanks.

David
said

@Ian

unfortunately you don't understand much about the marketplace, risk to credit profile pricing, and the general economics of personal/consumer funding models.

At the end of the day, if someone doesn't have the money, they don't have to take what's offerred for funding options.

Credit cards should be used as very short term or flexible solutions. Not long term financing nor a solution for one to acquire things well above their personal financing capabilities.

No I do not work for the bank.

Tod
said

Savings accounts are for children, buy stock in that bank that is making $2 bln each quarter and share in the profits.

eddytoronto
said

Are You Ready For How Bad It Will Get? Because here we are, nearing the end of the road!A day of reckoning is upon us and despite Canadian and the U.S. government�s massive bailouts, it is going to be difficult for the global banking system to survive with confidence for very long. How will the events unfold? the world�s largest banks are so close to bankruptcy, the entire banking system is vulnerable to a massive collapse. It looks like the Goverments that are in the market manipulating it, dont seem to understand that there is more money in the market than what they have. Canada is running out of time to get its budget and trade deficits under control.

accountant in BC
said

WOW!!! A stunning 1/10 of 1% rate reduction. Lets see what this saves the home buyer. A $300,000 mortgage for 5 year term over 25 years amortization and going from 5% to 4.99% will save you ... are you sitting down for this? ... $1.70 less per payment based on a monthly payment and a whopping $144.20 over the 5 year term. Thanks for the free large double double once a month.

KJ in Kingston Ontario
said

So the banks are charging about five percent on mortgage loans and paying about zero percent on savings -- nothing new here folks -- move along -- move along.... And still there are stories in the business section on why Canadians are going further and further into debt that they will never be able to repay with falling incomes and reduced employment opportunity and why the saving rate is non-existent.... Unbelievable.

Mark in NB
said

I'm a mortgage broker and can get rates around 4% on a 5 year closed....And from the normal banks if thats your beef with mortgage brokers (TD and Scotiabank to be exact)I don't know why anyone would walk into a bank to get a mortgage.

Randy
said

Nice to see the big banks attempting to keep our fragile economy growing while the Bank of Canada, Ontario and BC are doing their best to derail what limited growth we had with increased interest rates and the HST.

Jerry in Calgary
said

Now I know that there are many of you "brainy wiz" guys out there that could probably explain away how the "banking world" has evolved over the years to what it is today and probably, with all due respect.... to no one's satisfaction. But do you remember from stories told by your grandparents how the world and even the bank CEOs and executives survived quite nicely (thank you very much) when mortgage rates were steady at or near 3% and lending rates were usually just a few points highter? I know it will never be again but how I wish I had lived during those times. Imagine a 3% mortgage rate with credit at 6%. Now its steadily increasing mortgage rates tied to debt and credit card rates tied to the moon.

Ok Smarty
said

Wow the secret is out!! Banks make profit. Ok people that's just what we need banks that make no money. Or how about banks that take a loss every year, that would be so good for everyone and our economy. While we are at it how about a new government, I think the communist party is still active in Canada. Stop complaining and start buying some banks shares. You know the old saying if you can't beat 'em, join 'em.

Jim
said

Give me a break!!!You think HST is the reason? As if.Amortize the value of the HST over the life of mortgage and it is nominal. People add all kinds of things to their mortgage - condo fees, property tax, etc. etc.If it was the HST people would simply downgrade - instead on buying the $450K house buy the $400K house. Are you saying people are giving up houses all together and their dream of home ownership because of this? Doubt it. Attribute it to something else - like good old housing cycle.

Jerry in Calgary
said

Wow...how big and sensitive of them. I suppose that the next thing we will be hearing is that all of their CEOs and executives have cut their salaries as well by 1/10 of 1%. Banks are the only places in the world where it appears that licences are issued to legally rob from the working poor and call it.....charity. Disgusting is only one word that comes to mind and as for the other words....well.....they are not printable and I do want this opinion passed along.

Flust
said

I like how they try to downplay the deficit in home sales by decreasing the fixed mortgage rates. What about the real culprit, which is HST - the deliberate housing market bubble popper...

Rick in NB, Ste Marie
said

Well, so much for figures don't lie, but liars figure. I wonder where i have heard that tune?

memi
said

I agree with Toby and Wes and most of commenters except for one who tried to excuse the banks' "main street roberry" happening every day when they take our savings and offer fewer and fewer services!Banks practically get away with Daylight Robbing Techniques that would put to shame Al Capone. And it's all done legally by the Bank of Canada which is really a bunch of private banks dictating their own rules and not even listening to the government or consumers!We like to feel we we're superior to the Americans' derivatives casino market that has destroyed the global economy. But we're not! Harper gave away $75 Billion to the CMHC and this quiet give-away of our money to the banks is never discussed. Banks should be accountable to Canadian taxpayers. God knows we don't get any from our current dictatorship in Otttawa!

anon
said

I'd like to point out just how much 0.1% is when talking about hundreds of thousands of dollars. $300,000/1000 = $300 bucks a year. If you call saving 300 bucks a year a slap in the face sobeit, but I know alot of people who would disagree.

Dean in Abby
said

Somehow, the banks still need to make their 1.5-2 billion in profits per quarter without giving you anything for it. Just a couple of weeks ago, the central bank raised its lending rate and I wondered why. At the time, people were saying the economy was slowing and it didn't make sense to do it. I guess the "experts" don't really know what they are talking about now do they? Don't get me wrong, without profits, no one's pensions or investment portfolios earn anything. However, it is a bit overwhelming to see what the banks are earning and realizing that they really don't pay anything to you on savings accounts. There also seems to be a complete disconnect when you see the interest rates charged on bank cards.

Max, in Vancouver
said

Fortunately, for the buyer, there are many options for obtaining a mortgage and the greedy banks should be your last resort, not your first. The Credit Unions want your business and are willing to offer rates to get it. Shop around people and negotiate. You can't fight a big greedy bear but you can starve it!

Brian Fr Langley
said

Toby, you are miising a critical point here. You think banks earn only on the spread bettween what they pay the Bank of Canada and what they charge you. But interest is typically an annual calculation, (that is the 5 % mentioned in this article is what they earn on an annual basis) so if inflation runs at 2% thay actually earned 2% less. Banks are not in business to lose money. Canadian economists are calling again for whats called "quantitative easing" (printing more money) This will create more inflation which will mean higher rates still to come. I suggest you all hang on to your hats I doubt we've seen the end of interest rate hikes despite this little dip.

Al in Orillia
said

You can all thank Mcguinty for the huge drop in the housing market. I wonder just how far in the hole this government really is, because I don't believe they''re telling the truth and they keep trying to find new revenue streams. The Hst, now they're going to allow online gambling and MMA. What's next? legalize prostitution and tax it? How about legalize drugs and tax them? How about we get a new provincial government!

Eric
said

I also agree with Toby and Wes, Talk about putting a whole new spin on the term "bank robber" *LOL*

Norm in Ontario
said

Toby, well said

Ian
said

I have said it for years. Banks should be considered as legalized loan sharks. Mortgage rates suck, savings interest rates suck, yet interest rates on credit cards are outrageous. It is high time for some government intervention at the banking and oil company levels. The poor consumer keeps taking it you know where while these companies make off like thieves.

Bob
said

1/10th of 1%.

How big of them.

It is nothing more than a slap in the face from the banks.

Wes
said

i couldn't agree more Toby! this is a big joke.

Toby
said

Wow 1/10th of 1%. They pay next to nothing on savings and are setting record profits. This is robbery without violence.

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