Other banks expected to follow suit
The Royal Bank of Canada (RBC) announced that they were lowering the interest rate of their five-year fixed-term mortgage offering.
According to CBC News, Canada’s largest bank brought down their five-year rate to 3.74% from 3.89%, representing a cut of 0.15%. RBC lowered interest rates in the wake of Canada’s bond yield falling to 1.75%.
RateSpy.com founder Rob McLister told CBC News that, though subtle, the move is likely to prompt similar actions by other major Canadian banks in the coming days, and it's actually overdue based on what's happening in the bond market.
"When people see materially better rates from non-banks online, it puts more pressure on the Big 6 to act," McLister told CBC News.
Calculating a sample mortgage of $400,000, James Laird, president of mortgage brokerage Canwise Financial, told CBC News that at the old five-year fixed rate of 3.89%, homeowners would pay about $2,080 a month. At the new rate, that monthly mortgage payment would drop to $2,048, saving $32 a month.
"RBC is the largest mortgage lender in Canada, so whenever they move their mortgage rates, we can expect that the other four banks will follow suit," Laird told CBC News.