RBC, Canada's mortgage lending giant, admits that a rates war is being waged
To say Canada’s mortgage market is cutthroat is an understatement.
During a conference call yesterday, Dave McKay, chief executive of Royal Bank of Canada (RBC) — the country’s biggest mortgage lender — confessed that RBC is battling through what he called “historic” and “intense competition.”
In fact, RBC’s mortgage business is earning just a third of what it used to earn, he explained.
“Our mortgage business is seeing low interest margins driven by a volatile cost of funds and competitive pricing pressures,” the company added in an emailed statement today. “We believe these trends are impacting the entire industry.”
And RBC is right. They are.
In an urgent bid to preserve market share amid elevated interest rates, high debt loads and feeble real estate activity, banks are pulling out all the stops. Seemingly, every mortgage broker I talk to recounts tales of customers being quoted astonishingly low rates by their bank.
Yet, you wouldn’t guess there’s a rate war based on what’s being advertised.
For example, if you survey every national lender at the moment, the average conventional published rate on a three-year fixed mortgage is 5.58 per cent. That’s a cringeworthy deal compared to the best nationally-advertised offer on an uninsured three-year: 4.84 per cent from Pine Mortgage.
Picture an unsuspecting first-time buyer trusting their lender and signing up for an inflated rate like 5.58 per cent. With the average first-timer getting a $410,000 mortgage, according to Equifax Canada, that blunder would cost them $8,834 over 36 months.
More than ever, this screams the need for comparison shopping. But while you’re out there rate hunting, beware of wolf deals in sheep’s clothing. Some “special offers” are bare-bones
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