Desperate banks are competing over rates

With fewer buyers, some worry their portfolios will shrink

- CLARRIE FEINSTEIN

Scotiabank is offering "aggressive rates" on mortages, while TD Bank and BMO are offering cash back promotions.

Low real estate sales and fewer buyers have pushed the major banks to offer competitive mortgage rates that could prove helpful for homeowners facing renewal this summer and hoping to negotiate a better deal.

It comes at a time when the Bank of Canada’s key rate drop has led to confusion for homeowners over mortgage rates.

On June 5, the Bank of Canada cut the key overnight rate by 0.25 percentage points, from five per cent to 4.75 per cent, indicating the beginning of a rate cut cycle.

“Whenever a cycle change happens it can be a bit confusing,” said mortgage broker Ron Butler. “People’s minds might start going toward a variable rate, but the variable rate is still expensive compared to the fixed rate.”

The interest rate on variable-rate mortgages is determined by the Bank of Canada’s rate hikes or cuts, whereas most fixed-rate mortgages are tied to the five-year bond yield, meaning when the bond yield goes up so does the interest on fixed-rate mortgages.