If you’re shopping for a mortgage, now might be a good time to brush up on your negotiating skills because lenders are getting desperate for your business.
Driving the news: In an earnings call last week, RBC CEO Dave McKay flagged “intense competition” as a headwind to the bank’s mortgage business, which he said had shrunk to one-third of its usual size.
Why it’s happening: Home sales have been running well behind their historic average for months and dipped to 9% below pre-pandemic levels in July. That’s left lenders competing over a shrinking pool of customers.
Why it matters: Competition among lenders is bad for banks’ margins — McKay noted they’re at historic lows — but good for homeowners willing to shop around for deals.
- Mortgage rates advertised by the Big 6 banks have come down slightly from their 2023 highs, but borrowers are being offered much steeper discounts on a discretionary basis, according to mortgage strategist Robert McLister.
- Other lenders are advertising lower rates, too: Pine and Nesto are pitching a five-year fixed mortgage at 4.44% and 4.34%, respectively — well below the 5.12% average offered by the large banks.
What’s next: As the Bank of Canada continues cutting interest rates, mortgage rates will follow. Lenders hope that will trigger a jump in home-buying activity so they don’t have to compete quite so aggressively for borrowers’ business.—TS