Canada’s largest bank may have sparked a rate war by offering customers a “special offer” 5-year mortgage rate of 3.74%.
The reduction of 15 basis points is likely to be met with similar deals from other major lenders; many alternative lenders have already reduced rates but the Big 5 have been holding back.
“Banks could’ve cut fixed rates weeks ago. The reason they held out is because they can,” RateSpy.ca founder Rob McLister told CBC News.
With bond yields falling following the BoC’s dovish tone on interest rate rises, mortgage rates have been expected to fall and some lenders are already offering rates as low as 3.29% for a 5-year FRM.
The RBC cut is notable as it’s the bank’s first cut since 2017. It’s also notable for its minimal size, which will likely have a corresponding impact on the market – unless further cuts follow.
“RBC is the largest mortgage lender in Canada, so whenever they move their mortgage rates we can expect that the other four banks will follow suit,” James Laird, president of CanWise Financial told RateHub.ca. “We anticipate that the other big banks will soon have a publicly posted rate of 3.74% as well.”
RateHub.ca calculates that with a $400,000 mortgage a typical homeowner would save $32 a month on their $2,080 monthly payment.