We’ve seen it happen at least twice just this year. One major lender drops their rates on five-year fixed term mortgages and all the other banks soon follow. It’s happening again. Except this time, the major banks won’t have any part of it.
It was on Thursday when True North Mortgage dropped their rates to 2.89 per cent; and Xceed Mortgage Corp. was soon to follow, offering 2.84 per cent to their customers who had impeccable credit. Bond yields had dropped, banks were paying less money, and so they wanted to pass those savings on to their customers. It was the same thing that occurred the last two times banks dropped their mortgage rates. After rates were initially dropped by one lender, it was thought that this was the beginning of another war in Canada. And the creators of it believed it would be, too.
“We expect 2.89 to become the norm by the end of the week,” said Dan Eisner, CEO of True North in Calgary.
But, that’s not happening. Instead, the major banks still have their five year rates posted at 3.94 per cent or 3.99 per cent, the same rates they’ve been posting for months. So how come the major players are choosing to sit out this latest round of mortgage wars? There are a couple of reasons.
The first could be that the credit rating agency S&P just lowered the rating on many Canadian banks due to unsustainable house prices. That could be causing banks to be a little more prudent. But what’s more likely, is that no one wants to step on the toes of the federal government. Especially after new mortgage rules went into effect just last month.
It was the government that was incredibly displeased last time the banks started trying to beat each other out by offering the very lowest mortgage rates earlier this year. In a matter of just two days, huge names like BMO, RBC, and TD Canada Trust all dropped their rates by at least 1 per cent. And afterwards, Finance Minister Jim Flaherty called them “irresponsible” for doing so.
There are also all the new mortgage rules and OSFI guidelines that the banks have to think about when it comes to their lending practices. And with many banks getting ready to comply with the new rules (and already implementing those already in place), it may just simply not be a good time for them, as they’re getting adjusted.
Whatever the reason, the case is clear. There is a mortgage war going on right now in Canada; and the major players want no part of it.
