RBC lowers mortgage rates on heels of Bank of Canada’s surprise cut

(January 26, 2015 , posted in Economy)

Royal Bank of Canada is the first major lender to lower mortgage rates after five-year bond yields fell in the wake of a surprise cut by the Bank of Canada last week, according to rate-monitoring websites.

Royal Bank, the country’s second-biggest lender by assets, offered a five-year fixed rate of 2.84% on Jan. 24, down from 2.94% last week, according to rate-tracking website Ratespy.com. That’s below RBC’s posted rate of 4.84%. The bank also trimmed its three-, seven-, and 10-year rates, according to CanadianMortgageTrends.com, an industry news website.

The bank joins other lenders standing pat on its 3% prime rate, which is tied to variable mortgages and lines of credit. Prime typically moves in tandem with the Bank of Canada rate, which was cut to 0.75% on Jan. 21.

“We continue to review the impact of the Bank of Canada rate decision,” Wojtek Dabrowski, a spokesman for the Toronto-based bank, said in an e-mail today. “Our individual product lines continue to make pricing adjustments in the regular course of business to ensure we provide competitive rates in the marketplace.”

Fixed-rate mortgages tend to rise and fall with bond yields. Yields on five-year government bonds plunged 17 basis points on the day of the Bank of Canada cut, to about 0.86%. That’s down from 1.8% in April.

Royal Bank cut its 10-year fixed-rate mortgage to 3.84%, the lowest of any lender outside Quebec, according to Ratespy.com.