CIBC leads the way by reducing unusual steps by half by half. Now, its high rate of 5-year fixed rate is below the 4.00% threshold, at 3.99%, the lowest price publicly advertised among the top 6 banks.
Among the big banks, TD and BMO also made more measures of interest rates this week. Meanwhile, other mortgage lenders in the country, including brokers, non-bank lenders and credit unions, have introduced steady cuts.
The ongoing threat of tariffs, coupled with a slowdown in the labor market, also increases the chances of Canadian banks cutting a quarter of the next week.
“bank [of Canada] Now, it is continuing to cut or cut a more aggressive timeline than before, because it is for what Trump does, a type of insurance against the headwind. ”
While the bond market follows a similar trajectory, fixed mortgage rates may be closely related to bond yields generally not as often as they usually are in more common market conditions, Larock added.
Why mortgage rates delay bond rates
The recent rate adjustments made by CIBC, BMO and TD may be a reaction to the decline in the Canadian bond market for five years, although these cuts have been delayed and alleviated by short-term volatility.
Bond yields fell to a three-year low of 2.50% earlier this week after peaking at 3.29% in mid-January, consistent with expected tariff implementation. However, they have since recovered to 2.69% after the latest tariff delays, which is now scheduled for April 2. While bond yields have been falling since January, banks have only recently begun adjusting their fixed interest rates in response.
“If you’re in an environment where bond yields are rising and falling, lenders won’t respond to every grunt and groan in the bond market,” Larock explained. “We’ve been in a lower bond yield environment for a while, and for me it reflects a long-term trend, not a short-term trend.”
In this turbulent economic environment, banks only respond to continuous changes, indicating that there will continue delays between bond yields and fixed mortgage rates for the foreseeable future, Larock said.
“What many people don’t realize or appreciate is that risk premiums are rising despite the decline in bond yields,” he explained. “So, when bonds are in fear of economic shocks, fixed rates don’t react as usual.”
Larock compared the current situation with the collapse of oil prices in 2014 and 2015, which led to the Canadian bank halving interest rates in July 2015. The move caused the five-year bond yield to drop to three-quarters of four percent, although fixed mortgage rates were not followed immediately.
“Similar to what happened at that time and what happened with bond yields because the ratio is stickier than the ratios people are used to seeing, which is the fact that this is the economic shock,” he explained. “Frankly, in an environment like this, lenders are not going to fight for business because extending credit when risks increase isn’t something they are keen to do.”
Why banks are lowering mortgage rates now
Regardless of its pace relative to bond yields, fixed rates are beginning to drop, but Larock is reluctant to see it as a sign that banks expect to have an active spring market. Instead, he suggested that CIBC’s aggressive pricing could be a reaction to the relatively weak mortgage origin performance in recent quarterly earnings.
“CIBC wants to be seen by the market as the lowest price of banks, but other banks will not lose business to CIBC because I think the rest will match it,” Larock said.
Others speculate that banks have taken a more aggressive approach to viewing it as a pre-later calm before a potential economic storm. By lowering interest rates, they hope to attract buyers’ sidelines before a mature trade war forces them to retreat.
“This year, it would have been a busy housing market, but due to the tariffs, we’re going to see things slow down,” said Tracy Valko of Valko Financial. “We’re going to have a busy period and I think it’s coming now, but I think it’s going to be short.”
Valko explained that if there were indeed tariffs on blankets, it could cause huge unemployment and a major recession. In this case, this latest pause may be the most active period of the otherwise quiet year for the housing market.
“With the expectation of mortgage activity, banks want to get into the door first with competitive interest rates, so they have gained a lot of activity to help fill the pipeline,” she told her. Canadian Mortgage Trends.
Brokers are left behind
As big banks cut fixed interest rates for major borrowers, brokers (who have recovered from tough years) find themselves in a difficult position, Valko said.
“These bank branches are not only on renewals, but on purchases, but also on the goods the banks can offer, and the brokers are getting bigger,” Valko said. “We can buy interest rates on brokers, but the pay spread is small, and we have been in a slower market over the past two or three years.”
With competition from fixed-rate heating in major banks, Valko fears brokers will have less market share left.
“We will not be doing the expected and forecasted mortgage activities this year, so these banks will want to gain as much market share as possible in a downtrend environment, and so do brokers,” she said. “Brokers may have to be more competitive in terms of reducing revenue, purchasing rates and less commissions.”
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Bank of Canada BOC Bond Earnings Dave Larock Fixed Mortgage Rate Fixed Mortgage Rate Falled Mortgage Broker Mortgage Rate Lower Mortgage Rate Trend Tracy Valko
Last modified: March 7, 2025
