In the last 12 days, big banks have launched a Blitzkrieg offensive on the competition.
- They’ve initiated unusually aggressive public rate promotions
- They surprised the market last week with fixed-rate reductions–despite bond yields surging over 30 basis points, and despite rate increases from non-bank lenders.
There’s something going on behind the scenes.
The Big 5’s mortgage divisions are morphing from Gomer Pyle to John Rambo…fast.
Bankers are running through the jungle with M-60’s, whereas in kinder and gentler times (pre-2009), they sat camouflaged in the weeds with sniper rifles.
More: Banks Wage War…
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Last modified: April 28, 2014
I think banks are waking up and realizing they can’t keep telling investors they’ve lost market share.
P.S. ING is a bank without mortgage specialists and brick and mortar offices. Theoretically shouldn’t they have the best mortgage rates of all? I wonder why they and PC Financial aren’t dominating the market.
I think they are trying to drum up business in the weeks up until April 19th, then they will stop their promotions and blame the drop in business on the rule changes so that the banks can blame the government for all of their woes.
ING is leading the 5 year variable at 1.95% way before big 5 started coming off the their 2.25%. Most importantly, they have the best escape clause into a fixed rate when rates eventually start climbing.
The big 5 are running scared. Thank you ING, from a customer who shops around. We will need every penny when HST and smart meters start up.
Great Rambo picture Rob, going to put on some 80’s music now. Keep up the great work!
Some of ING’s rates such as their 5 Year fixed are being bettered by the big banks, I locked in with 5Yr with 3.74% (discounted) when ING is still at 3.89%.
Have you heard about the CIBC 2% cash-back for penalty relief on refinances? 3.99% is the rate and 2% of the mortgage balance is given back. Makes for an effective rate in the 3.6 ballpark. Firstline doesn’t have it yet but we are told they are working on it, but would have a reduced commission.
Hi Mike, Thanks for the note. We tweeted about CIBC’s offer last week. It’s very aggressive and I heard that FirstLine had a lot of brokers asking why they can’t offer it. It would be great if FirstLine matched it. FirstLine’s 20/20 pre-payments are better than CIBC’s 10/100 and CIBC can’t compete with FirstLine’s “Matrix” product. Hopefully they also match CIBC’s 3% offer on mortgages over $400k. Cheers, – Rob
With full clawback on these cash-back product, you’d better be confident you won’t have to break your mortgage for ANY reason within five years, otherwise your total discharge cost will be astronomical.
Rob: have you heard if the CIBC offer applies to purchases as well? On their website as well as on the ad in the paper the offer is under the “transfer your mortgage to CIBC and get…” So I’m just wondering about the kind of transactions it applies to. Rate wise Firstline still has the advantage (>30bp) if the applicant doesn’t need the cash back.
The problem with the banks is that by matching what top brokers offer almost everybody, they believe they’re putting pressure on the broker channel. But the reality is:
1) The banks are still dependent on the broker channel for both triple-A and B lending as some of them have subsidiaries that do both and only work with the broker channel;
2) They refuse to understand that many people can’t simply be bought with a rate. They must offer something else. That has been a strong point for me in terms of getting triple-A business;
3) Banks are still very much risk averse, even with people that have good (but not perfect) credit;
4) It’s obvious that if brokers want to survive in the triple-A business, they must not rely exclusively on their rates any more (this has actually been the case for some time now);
5) Brokers should increasingly boycott banks that have two hands in the cookie jar, especially the offenders that consistently undermine the brokers in one segment but expect brokers to send them business through another segment
Am I forgetting anything?
Lior, totally agree with you here. specially like 5) Brokers should increasingly boycott banks that have two hands in the cookie jar, especially the offenders that consistently undermine the brokers in one segment but expect brokers to send them business through another segment.
TD specially, they give so much power to their specialists to steal the deals and are different for broker channel, HELOC is perfect example for this discrimination.
Spoken like a true discount mortgage broker. FWIW if you read the CIBC ad it states that the 3.99%, cash back offer applies to transfer in business only. If you don’t need to refi they also pay the legal fees. Good deal.
Al
Almost all lenders pay legal fees on switches. That is nothing out of the ordinary.
That’s true. ING would even let you roll up to $5,000 of the penalty to the new mortgage.
I won’t mention specific names but people who are in the business know very well who the institutions are.
=D
Yeah and we were told on this site two weeks ago that the bond yeilds were going up and to lock and stack em, by locking in your mortgage. If a person waited you get much much better deals. Not only that for, variable rate it gets better all the time, you can get prime – 0.5 or more! This when many talking heads “ie. economists” are all crowing, oh well the BoC is going to raise rates, “they have the green light in my opinion”, “inflation in Jan was up to near 2%, here comes the rate increase”, “we think the July meeting the rate will go up, but it is very conceivable that at the april meeting they will surprise everyone and it will go up”. You know what I think, 2,7,34,37,44,49 are the lotto number pick for this wed. Off course that is just my opinion.
Steve: we can only guess. Trying to time the financial markets is futile. The banks are trying to compete aggressively because we’re heading into the spring real estate market and they’re also flush with money after reporting very healthy profits over the past two weeks. Who could have predicted that RBC would cut some of its posted rates when the yield spread actually tightened up? That doesn’t mean we should just ignore the fundamental elements of this market. What’s happening now, with the banks publicly advertising rates that compete with the broker channel, is just short-term noise.
Hi Steve,
Mortgage markets are kind of like airlines.
When oil prices jump higher, airfares go up too.
With fixed mortgages, if 5-year government yields jump higher (1/4%+), the best fixed rates go up too, the great majority of the time.
Of course, we can’t forget the word ‘almost.’ Every rule has exceptions.
Forecasting short-term mortgage pricing is a numbers game, similar to a game of poker. In poker, when you’re dealt Ace-King suited, you bet. You’ll be beat on occassion by a two-seven offsuit, but infrequent exceptions don’t diminish the rule.
Cheers,
Rob
Hi Lior,
Further to your first question: CIBC has told us the cash-back offer is for switches and refinances only. But with a refinance the customer would be responsible for all normal closing costs (legal fees, etc.).
Hi Rob,
Thanks for the clarification. CIBC took a full page ad in today’s paper and the fine print clearly states this offer is for transfer-in or refinances only. I guess for purchases they may offer the client a discretion matching broker rates if they’re of enough value to them.