Major Canadian banks are in an intense battle for mortgage customers, significantly reducing profit margins. Royal Bank of Canada (RBC), the nation’s largest mortgage provider, has reported that its mortgage business earnings have plummeted to just one-third of previous levels.

During a conference call, RBC’s CEO Dave McKay described the current situation as “historic” and marked by “intense competition.” The bank attributes this to volatile funding costs and competitive pricing pressures — trends they believe are impacting the entire industry.

This fierce competition stems from a combination of factors, including high interest rates, elevated consumer debt levels, and sluggish real estate activity. As a result, banks are offering remarkably low rates to retain market share, often significantly below their advertised rates.

Also read: Realtors Are Throwing in the Towel: TRREB Membership Drops for First Time in Years as Market Cools

Industry experts are advising potential borrowers to shop around, as the discrepancy between published and actual rates can be substantial. For instance, while the average advertised rate for a three-year fixed mortgage stands at 5.58%, some lenders are offering rates as low as 4.84%.

Also read: GTA New Home Sales Hit Record Low in July 2024

However, consumers are cautioned to look beyond just the interest rate. Some low-rate “special offers” come with restrictions on refinancing or porting the mortgage, which could lead to hefty penalties if circumstances change. Financial advisors recommend considering the flexibility of mortgage terms, not just the rate.

The competitive landscape has shifted dramatically from previous years when banks could rely on customer inertia at renewal time. Now, most institutions are aggressively working to retain customers, often matching or beating offers from competitors.

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