Toronto-Dominion's mortgage rivals use gamesmanship on rate hikes

Canada's big banks don't seem keen to follow Toronto-Dominion Bank's lead on mortgage hikes – at least not all the way.

Posted mortgage rates have diverged in the past week following rate hikes by Toronto-Dominion, Royal Bank of Canada, Canadian Imperial Bank of Commerce and National Bank of Canada. Bank of Nova Scotia and Bank of Montreal have stood pat – so far – creating a 45 basis-point difference on five-year fixed-term loans.

"This is very different from what we've seen in the past," Barclays Plc analyst John Aiken said. "It may be a bit of gamesmanship: TD and Royal were seeing how far they could lift mortgage rates for the group, but it doesn’t look like the others are playing ball."

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The Toronto-Dominion Bank (TD) logo is displayed on a newly-opened branch near the CN Tower, back left, in Toronto, Ontario, Canada, on Tuesday, Dec. 21, 2010. Toronto-Dominion Bank agreed to buy Chrysler Financial Corp. from Cerberus Capital Management LP for $6.3 billion in cash, adding an auto-finance company in its second-largest acquisition. Photographer: Norm Betts/Bloomberg

CIBC, which expanded its mortgage book at a faster pace than the rivals in the past two years, lifted its posted rate for five-year mortgages by 15 basis points to 5.14%. That undercuts Toronto-Dominion's 45 basis point hike to 5.59% on April 25 in what RateSpy.com founder Rob McLister called "the biggest move in years" for Canadian banks.

"This is a bit of differentiation in terms of strategy," Aiken said. "In the past CIBC has been growing their mortgage book at a faster pace than the rest of the peer group and it looks like they're trying to continue that."

Royal Bank, Canada's largest mortgage lender, and Montreal-based National Bank also undercut Toronto-Dominion's move, opting for a 20 basis-point hike on the five-year term to 5.34% this week. Bank of Montreal and Scotiabank have maintained posted rates at 5.14%, according to their websites.

"Scotiabank has not increased its posted mortgage rates since January," Lukas Gerber, a bank spokesman, said in an e-mailed statement. "Our number one focus is providing value for our customers – we manage our pricing very actively to do just that, using a variety of market benchmarks."

Banks generally give homebuyers better terms than their posted rates. Canada's big banks are offering unadvertised discretionary rates of 3.39% for five-year fixed mortgages and 2.75% for variable-rate mortgages, according to RateSpy.com. That's little changed from late January.

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