Canada’s big banks seem on the brink of a renewed mortgage rate war as four of them – Royal Bank of Canada (RBC), TD, CIBC and BMO – cut their prime lending rates to 2.85 per cent from 3 per cent January 27, following the Bank of Canada’s surprise interest rate cut January 21.
As of January 27, RBC has so far been the only bank to reduce its five-year fixed mortgage rate, down to 2.84 per cent for qualified borrowers. However, the past two days have seen widespread media speculation that other big banks will follow suit to compete with RBC.
On January 26, following RBC's five-year rate cut, mortgage rate website RateSpy.com revised its estimate of the five-year fixed rate that big banks will offer their most qualified borrowers, down to 2.84 per cent from 2.89 per cent, in anticipation of banks following RBC's lead.
TD Bank’s January 27 decision to cut its prime lending rate is an about-face from its initial reaction to the BoC’s overnight rate reduction. TD’s official statement January 22 said that the bank would not be cutting its prime rate.
“Yesterday’s announcement by the Bank of Canada was unexpected … Our decision not to change our prime rate at this time was carefully considered and is based on a number of factors, with the Bank of Canada’s overnight rate only being one of them.”