Bank earnings announcements season ended this week with Canada’s major banks announcing more than $5B in profits in Q1 2010. Main drivers were less losses on loans as the economy recovers, along with personal loans and mortgages.

This is great news for shareholders, but probably not so great for mortgage shoppers, as highlights our story earlier this week about how Canadian’s lender loyalty could be costing them thousands of dollars over the years. TD was so happy with the results, that they’re giving their employees an extra day off next week!

Here is a breakdown of the bank profits:

Bank earnings – Q1 2010
Bank	Q1 profit	Change from year ago
	$988 million	+17%
	$652 million	+343%
	$657 million	+192%
	$215 million	+211%
	$1.5 billion	+35%
	$1.29 billion	+98%

BMO (Bank of Montreal) has introduced a new 3.75% 5 year fixed mortgage with a maximum amortization period of 25 years. The current maximum amortization period is up to 35 years. Here are the details on this mortgage special:

BMO is still showing their posted 5 year rate at 5.39% on their website, while the 5 year fixed rate in their “special rates” section is stil 4.09%.

This is a major move by one of the big banks and comes as BMO reported a $657M first quarter profit this week and is focusing on growing its mortgage market share after a couple years of losing ground after deciding to stop selling their products through mortgage brokers in early 2007. BMO’s market share fell to 9.2% in the last quarter, down 0.7% from the same time last year.

BMO also released details of a new poll that showed:

RBC announced it is dropping its variable mortgage rate effective today, February 9, 2010, to Prime – 0.1% or 2.15%. This is a “* special rate” (see below for details) which enables RBC to become the first bank to drop its variable rate below prime and is following the thoughts of our Mortgage Rate Panel Outlook, who believed that larger discounts to prime will be coming back in vogue over the next few months.

Mortgage brokers have been offering variable rates below prime for a few months now with the current 5 year variable on RateSupermarket.ca listed at 1.90% and the lowest rate we’ve seen to date is the 3 year variable rate down to 1.85%.

It’s still a very positive sign for mortgage shoppers, that a big bank is bringing the discount to prime back on its variable rates, and could be a signal of things to come if/when the other banks follow.

* Special offer conditions

For mortgages approved on or before February 28, 2010 funds must be advanced within 90 days of date of application in order to qualify for the Special Offer rate. Offer may be changed, withdrawn or extended at any time, without notice.

Applicable to residential mortgages only and subject to Royal Bank of Canada lending criteria for residential properties. Some conditions apply. Rates shown for the applicable term are Royal Bank of Canada’s special discounted rates and are not the posted rates of Royal Bank of Canada. Offer may be changed, withdrawn or extended at any time, without notice

.

TD Canada Trust announced their lowering their fixed mortgages rates effective tomorrow January 29, 2010. The biggest changes is the -0.20% change on the 3 year fixed rate to 4.30%. They are the most recent of the big banks dropping their posted rates this week.

TD’s recently lower mortgage rates include the following:

TD also has a 5 year fixed special on their website for 4.24%, which compares to the lowest 3.75% 5 year fixed available here. Their 5 year closed variable rate remains at Prime (2.25%).

Earlier this week a forward looking agency said that today’s well-informed shoppers will be on alert in 2010, and take advantage of the vast amount of information out there to make better buying decisions.

We hope this is the case for Canadian mortgage shoppers as well. Although, there is a vast amount of information on different mortgage rates, products, lenders and brokers, many Canadians are not taking advantage of them.

A CAAMP survey last year found that “when obtaining their mortgages, Canadians received an average of 1.94 mortgage quotes. Only 3% received more than 4 quotes”. This is truly an amazing statistic and the worst thing a mortgage shopper can do is simply sign and return the renewal form they receive in the mail from their current lender. Many times the renewal rate is simply the posted rate which can be up to 2% higher than the best mortgage rates available at the time.

If you’re looking to take out a mortgage, we recommend these 3 simple steps:

1. Do your homework

The Bank of Canada and Finance Minister have stressed recently that they are worried Canadians are taking on too much debt as a result of record low interest rates, including very low mortgage rates, and they have to start planning for upcoming inevitable rate increases.

Although the Bank of Canada said this week that they won’t increase rates to cool off any housing bubble, they are still looking to increase rates during the summer. As a result, if you’re looking for a mortgage now, make sure to plan in higher rate increases, many experts are saying 2-3% over the next few years, and see if you can still handle those payments. Understand what level of risk and repayments you’re willing to take on.

2. Compare mortgage rates

Taking into consideration of the renewal letter example above, its very easy to compare mortgage rates now, and get a quick grasp on what’s available in the market, that there’s no excuse!

3. Speak to a mortgage specialist

For any major decision, it is usually worth it, to speak to an expert. We understand that mortgage rates are not the only thing that matters when mortgage shopping, there are very important details such as the prepayment options, portability, penalties, etc that you also need to consider. However, mortgage rates are a good starting point and enable you to explore your options from there.

A good mortgage planner such as a broker will help you understand the various options, find the best product for your own personal situation and best of all there services are free, as lenders pay them commissions for funded deals.

Following these 3 easy steps will provide you with a great understanding of your own financial situation, what products are available in the market and an expert opinion to consider. You should be in a good position to then make an informed decision on your mortgage. If 2010 is the year of the well informed consumer, make sure you’re one of them.

The National Post reported on the chief economist’s at Bank of Nova Scotia outlook on mortgage rates and the economy at a recent briefing.

“Bond yields and mortgage rates could head higher before the Bank of Canada’s pledge to hold interest rates steady expires in July. There’s a very good chance long-term rates will head up before then,” Warren Jestin said in Toronto at a briefing sponsored by the Investment Funds Institute of Canada.

He also said that homeowners and variable rate mortgage holders shouldn’t take the Bank of Canada’s bland announcement about keeping rates steady last week at face value, but read the “fine print” as he believes it’s likely 3 & 5 year fixed mortgage rates will be higher before July 2010.

Although this is a longer view than our Mortgage Rate Outlook Panel, you may want to see what short term view our panel of experts have on mortgage rates.

RBC lowered their mortgage rates again, and they are effective today, December 9, 2009. This comes the day after the Bank of Canada announced they were keeping the target for the overnight rate steady @ 0.25%.

Fixed Rate Mortgages

One-year closed: 3.40% (-0.20%)

Four-year closed: 5.14% (-0.05%)

Five-year closed: 5.49% (-0.10%)

Special Fixed Rate Offers*

Four-year closed: 4.09% (-0.05%)

Five-year closed : 4.19% (-0.10%)

Variable Rate Mortgages

Variable Closed RBC Prime + 0.00% (no change)

See how these mortgage rates changes stack up against the rest of the market and compare mortgage rates now.

* The rates indicated are special discounted rates and are not the
posted rates of Royal Bank of Canada. To calculate a rate discount
compare the Special Offer rate against the posted rate for the
applicable term.

Special Offers may be changed, withdrawn or extended at any time,
without notice. Not available in combination with any other rate
discounts, offers or promotions.

The other major banks followed RBC’s move to lower mortgage rates this week. Bank mortgage rates are dropping as result of lower 1, 2 and 5 year bond yields. Bond yields drive fixed rates because they are a big part of mortgage lenders’ cost of funds that they use for fixed mortgage rates. Variable mortgage rates have stayed the same as the Bank of Canada has not changed their target for the overnight rate (which influences variable rates). The next Bank of Canada announcement is on December 8, 2009.

CIBC

CIBC mortgage rate changes:

TD

TD mortgage rates changes:

Fixed Rates

Variable Rates

VIRM Closed TD Mortgage Prime
VIRM Open TD Mortgage Prime + 0.80%

BMO

BMO mortgage rate changes:

Fixed Rates

Variable rates

5 year closed 2.25%
3 year open 3.05%

Special Offers*

5 year(fixed/closed) 4.29% -0.19%

*This special discounted rate is not the posted rate of BMO Bank of
Montreal. Rate is subject to change without notice. Offer may be
withdrawn or extended without notice. Mortgage funds must be advanced
within 90 days of the application.

Scotiabank

Scotiabank mortgage rate changes:

Their special discounted rates* also changed:

one-year fixed closed 2.35 per cent (decreases by 0.20 per cent)
five-year fixed closed 4.29 per cent (decreases by 0.25 per cent)

* The special discounted rates are not the posted rates of Scotiabank. Rates are subject to change without notice. Offers may be withdrawn or extended without notice and cannot be combined with any other rate discounts, offers, or promotions. Mortgage funds must be advanced within 120 days of the application date. Other conditions may apply.

RBC was the first big bank to drop their posted mortgage rates effective today, November 18, 2009, and the changes ranged from -.10% to – 0.20% on fixed rates and are as follows:

Fixed Rate Mortgages

One-year closed 3.60% (-0.20%)

Two-year closed 3.75% (-0.20%)

Three-year closed 4.25% (-0.20%)

Four-year closed 5.19% (-0.10%)

Five-year closed 5.59% (-0.15%)

Seven-year closed 6.65% (-0.15%)

Ten-year closed 6.80% (-0.15%)

Special Fixed Rate Offers*

Four-year closed 4.14% (-0.10%)

Five-year closed 4.29% (-0.15%)

Seven-year closed 5.20% (-0.15%)

Ten-year closed 5.35% (-0.15%)

Variable Rate Mortgages

Variable Closed RBC Prime + 0.00% (no change)

* The rates indicated are special discounted rates and are not the
posted rates of Royal Bank of Canada. To calculate a rate discount
compare the Special Offer rate against the posted rate for the
applicable term.

Special Offers may be changed, withdrawn or extended at any time,
without notice. Not available in combination with any other rate
discounts, offers or promotions.

BMO Economic Research published a report entitled Should I Stay (Fixed), or Should I Go (Variable)? This is a topic that many of our visitors have and we get emails about it, as well as conversations in the “Ask an Expert” thread in our discussion forums.

Here are some of the highlights:

Pro – fixed rates

Pro – variable rates

The verdict

This is pretty much the same conclusion that Dr. Milevsky came up with during his Fixed vs Variable research although, there is always the caveat that this is a very unique time in history, and this may again be a time to lock in rates. Be sure to speak to a mortgage professional before you take on your next mortgage and see what’s best for your personal situation.