Former Scotiabank Mortgage head John Webster weighed in, noting that the big banks’ competitive pricing is unsustainable and unlikely to continue for long.

A mortgage rate war is expected to intensify, with more than half of all mortgages held by Canadian banks set to renew over the next two years, says an RBC analyst.

With interest rates now down from peak levels, mortgage shoppers—especially those with mortgages locked in at historically low rates—will have a “strong incentive” to shop around for better deals, creating intense competition among lenders, RBC analyst Darko Mihelic wrote in a recent research note.

“In today’s market, lower mortgage rates will make a significant difference for Canadians whose mortgages were originated at all-time low interest rates,” he noted. “For a mortgage that was taken out in June 2020, a 50-basis-point impact in the renewal rate would result in annual savings of about $1,000.”

He adds that this will likely prompt mortgage brokers to “actively mine” their databases and preemptively reach out to clients to help them find more attractive renewal terms.

Mihelic points out that TD Bank, facing restrictions on its U.S. expansion, may turn its focus toward Canadian mortgage renewals in an effort to meet its financial targets. This could push other major players to sharpen their competitive edge.

“All Canadian banks view mortgages as a significant anchor product and, currently, loan growth across multiple loan categories is very low,” Mihelic said. “The chance to grab market share from a competitor is significant.”

A competitive challenge for brokers

Many brokers have pointed out that it’s becoming increasingly difficult to compete with the Big Banks, especially given their unusually aggressive mortgage rate pricing.

At a recent public appearance, John Webster, former CEO of Scotia Mortgage Authority, said there’s been a lot of “silly business” going on among the big banks as they strive to meet quarterly revenue targets. However, he added that it’s “a little bit early to say it’s solely driven by market share.”

He referenced Mihelic’s report, suggesting there’s been a “confluence of circumstances” that are driving the big banks to be more competitive on their mortgage product pricing, including TD’s recent troubles in the U.S. and CIBC having “challenges” with gaining market share.

“I don’t think that will continue,” Webster said. “I suspect in the first quarter…there will be more rationality in pricing, at least I hope so. It’s not sustainable.”

This article was written for Canadian Mortgage Trends by:

Average asking rents declined nationally on a year-over-year basis for the first time in more than three years in October, said a report out Thursday.

By Sammy Hudes

The report from Rentals.ca and Urbanation found average asking rents across Canada sat at $2,152 in October, down 1.2% from the same month in 2023 — the first national decrease since July 2021.

The decline is mainly concentrated in Canada’s major urban centres, with cities like Toronto, Vancouver, Calgary, and Montreal seeing rent decreases.

Urbanation president Shaun Hildebrand said it is rare for rents to decline year-over-year at the national level.

“This is happening as the key drivers of rent growth in recent years — a strengthening economy, quickly rising population, and worsening homeownership affordability — are beginning to reverse,” said Hildebrand.

“As a result, we can likely expect this trend for rents to continue in the near-term, particularly as apartment completions remain at record highs.”

B.C. and Ontario recorded the most significant annual rent decreases among the provinces, with the former seeing average asking rents for apartments down 3.4% to $2,549 and the latter recording a 5.7% drop to $2,350.

Rents rose 17.1% in Saskatchewan, which remained the fastest-growing province in the country in terms of asking price, after seeing 23.5% annual growth in September.

By city, Toronto recorded the largest annual decline in asking rents for apartments in October, at 9.2%, to reach an average of $2,642. Vancouver saw an 8.4% year-over-year rent decline to an average of $2,945, while Calgary apartment rents fell 4.7% to $1,995.

In Montreal, average rents were down 2.9% at $1,987. Ottawa apartment rents held steady with a 0.4% annual increase to reach $2,207.

However, Edmonton led rent growth in Canada’s largest markets as apartment rents rose 8.4% annually to an average of $1,584.

Based on the report, the average asking rent for a one-bedroom unit in Canada was $1,923 in October, down 0.8% from a year ago. The average asking price for a two-bedroom unit was $2,308, down 0.2%.

Overall, asking rents for purpose-built rental apartments in October rose 1.7% compared with a year earlier to reach an average of $2,100.

Meanwhile, condominium apartment rents, which averaged $2,265, were down 3.8%.

This report by The Canadian Press was first published Nov. 7, 2024.