Canadian Banks Lower Rates 5/28/2011

On 5/27/2011, four of Canada’s largest banks announced decreases to a number of their fixed rate mortgages by 0.10%.  The Royal Bank of Canada (RBC) [RY/tse:RY], Toronto Dominion Bank (TD Canada Trust) [TD/tse:TD], Bank of Montreal (BMO) [BMO/tse:BMO], and Bank of Nova Scotia (Scotiabank) [BNS/tse:BNS] have all dropped their 5 yr closed fixed mortgage rate 0.10% to 5.49%.

This is the second time within a week that mortgage rates have dropped.  On 5/19/2011, the big banks lowered their 5 yr closed fixed rate mortgage 0.10% to 5.59%.  Special fixed rate offers (discounted rates) for 5 year closed mortgages decreased to between 4.24% – 4.34%.   Their 1 year closed mortgages decreased to between 2.64% – 3.60%.  Other fixed and special rate offers also decreased.  The new rates become effective Saturday, May 28, 2011.


The rate declines are a result of decreased borrowing costs due to interest rates dropping (short term) in the bond market.  Bond yields have significantly decreased over the last few days due to rising bond prices.  Banks, which use bond markets to borrow money, are paying lower rates to borrow.  Canadian bond yields have dropped between 0.09 – 0.12% over the last 7 days.  In particular, the 5 year benchmark bond yield declined 0.12% from 2.45% to 2.33%, since May 20, 2011.

This also comes after the Bank of Canada announced it would hold the overnight lending rate steady at 1% on 4/12/2011.  However, as we’ve seen in the past the commercial retail banks no longer follow the central bank’s rate decisions, and act independently on their lending rates.


Investors and consumers should not be surprised if this is to be the final time retail banks lower rates before the central bank increases rates.  BoC rate increases can be expected to be swift once the economy begins to grow at a stronger rate.  We can also expect lending rates from commercial banks to increase much more rapidly than the overnight lending rate increases of the central bank.

For now, the Bank of Canada indicated rates may remain steady for a while longer.  But I still expect that in the 3rd or 4th quarter of 2011 to start seeing increases of at least 0.25% at first, before more rapid and significant increases follow.

Consumers and investor should secure loans and other lines of credit while rates are low,.  Although the credit may not be used, it may be much more difficult to secure later on.

Also see :
2011 Bond Market Outlook & 2010 Review
Variable Vs Fixed Rate Mortgage

Bank Press Release Announcements :
Royal Bank of Canada
TD  Bank
Bank of Montreal
Bank of Nova Scotia

Thanks & Happy Investing! — The Investment Blogger © 2011

Author: The Investment Blogger

I’m a private investor, who developed the “function-centric investing” paradigm. I am an investor who blogs a little here and there, rather than a blogger who invests a little here and there. I'm passionate about investing and sharing investment knowledge!

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1 Comment

  1. 7/5/2011 – RBC Mortgage Rates Rise:

    RB is changing its residential mortgage special rate offers effective July 5, 2011. The changes are as follows:

    Special Fixed Rate Offers
    One-year closed 3.30 per cent (increased by 0.10 per cent)
    Four-year closed 4.34 per cent (increased by 0.15 per cent)
    Five-year closed 4.39 per cent (increased by 0.15 per cent)
    Seven-year closed 5.20 per cent (increased by 0.15 per cent)

    Fixed Rate Mortgages
    Six-month convertible 4.45 per cent (no change)
    One-year closed 3.60 per cent (increased by 0.10 per cent)
    Two-year closed 3.95 per cent (increased by 0.10 per cent)
    Three-year closed 4.45 per cent (increased by 0.10 per cent)
    Four-year closed 5.14 per cent (increased by 0.15 per cent)
    Five-year closed 5.54 per cent (increased by 0.15 per cent)
    Seven-year closed 6.50 per cent (increased by 0.15 per cent)
    Ten-year closed 6.90 per cent (increased by 0.15 per cent)

    It is expected that the other big Canadian banks follow suit.

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