Who really sets the Mortgage interest rates?

Mortgage interest rates

An article recently addressed the pricing strategy of the Big Six banks, BMO, CIBC, National Bank, RBC, Scotiabank and TD and reflected on who really sets interest rates in Canada.  It highlighted the fact that when one bank announces a rate drop, the other banks soon follows.  The reality is, the bank rates were probably higher than the market for some time.  For consumers, the banks are seen as leaders of the pack and everyone waits to see what else they will do.

The article states, that ‘Canadians pay attention to the big guys however, because they’re either too comfortable to make a change or simply not aware of the facts.  The banks have a 90% stranglehold on the Canadian mortgage market and we’ve been slow to start paying attention to the alternative – often cheaper – options out there”.

The banks have high market share of the business and more profit each year , so they can afford to spend money on media and other forms of advertising.  the media attention helps them to capture more business with a rate drop after a lag time of passing on higher rates to consumers.  The informed consumer working with an independent mortgage broker will already know the market and what  mortgage product is best for their needs.  By reviewing your needs with your mortgage broker, you can discuss all of the options available from lenders, including bank and non-bank lenders, to ensure you are making an informed decision.

Original article: www.huffingtonpost.ca