Vancouver-based HSBC Bank Canada says it is discounting its variable mortgage rate starting Thursday to a level that undercuts the recently discounted rates of other major banks, as competition in the space intensifies.
The bank says it will offer a five-year variable closed rate of 2.39%, down from 2.49% and 1.06 percentage points below its prime rate. It says there’s no end date but that the rate could change at any time.
HSBC’s lowered rate comes after Toronto-Dominion Bank and Bank of Montreal started offering five-year variable closed rates of 2.45% in recent days at a heavy discount to their prime rate until the end of May.
Bank of Nova Scotia says it has also started lowering its rate to match the limited-time offer of its competitors.
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% from the same month last year. The national average sale price decreased by 11.3% year-over-year.
Home sales have slowed due to various factors, including measures introduced by the Ontario and B.C. governments 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 the banks.
The tighter lending rules are making it harder for homebuyers 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.
In turn, the central bank’s five year benchmark qualifying rate — which is calculated using the posted rates at the Big Six banks — increased last week to 5.34%. This qualifying rate is used in stress tests for both insured and uninsured mortgages, and an increase means the bar is now even higher for borrowers to qualify.