TD Bank drops 5-year variable mortgage rate amid competition

TORONTO — TD Bank is joining a rival bank in offering a highly discounted variable mortgage rate as competition among Canada’s biggest lenders heats up.

The Toronto-based bank said Tuesday it’s lowering its fiveyear variable closed rate to 2.45 per cent, or 1.15 per cent lower than its TD Mortgage Prime rate, until May 31.

TD’s special rate follows last week’s move by the Bank of Montreal, which discounted its variable mortgage rate to 2.45 per cent until the end of May.

Canada’s lenders often offer special spring mortgage rates as homebuying activity picks up, but Robert McLister — founder of rate comparison website RateSpy.com — said last week that BMO’s special discounted variable rate was the biggest widely advertised discount ever by a Big Six Canadian bank.

“TD is not lying down,” McLister said Tuesday. “Mortgage growth is the lowest since 2001, you’ve got interest rates going up, and less people getting mortgages because of that . ... They have the ability to match this rate and still make money.”

TD spokeswoman Julie Bellissimo said its special five-year variable rate applies to new and renewed mortgages, as well as the variable-rate term portion of certain TD home equity lines of credit.

The moves come amid slowing mortgage growth. The Canadian Real Estate Association said Tuesday that national home sales volume sank to the lowest level in more than five years in April, falling by 13.9 per cent from the same month last year. The national average sale price fell 11.3 per cent year-over-year.

Home sales have slowed due to various factors, including measures introduced in Ontario and B.C. to cool the housing market, such as taxes on non-resident buyers.

Other headwinds for mortgage growth include higher interest rates and a new financial stress test that makes it more difficult for would-be homebuyers to qualify with federally regulated lenders, such as banks.

As of Jan. 1, buyers who don’t need mortgage insurance must prove they can make payments at a qualifying rate of the greater of two percentage points higher than the contractual mortgage rate or the central bank’s fiveyear benchmark rate.

An existing stress test also stipulates that homebuyers with less than a 20 per cent down payment seeking an insured mortgage must qualify at the central bank’s benchmark five-year mortgage rate.

The tighter lending rules are making it harder for buyers to qualify for uninsured mortgages, and shrinking the pool of qualified buyers for higher-priced homes, CREA’s chief economist, Gregory Klump, said in April.

Meanwhile, Canada’s largest lenders all raised their benchmark posted five-year fixed mortgage rates in recent weeks as government bond yields increased, signalling a rise in borrowing costs.