CIBC led the way by taking the unusual step of reducing rates by as much as half a percentage point for select terms. Its high-ratio 5-year fixed is now below the 4.00% threshold, at 3.99%—the lowest publicly advertised rate among the Big 6 banks.
Among the big banks, TD and BMO also made more measured rate reductions to select mortgage terms this week. Meanwhile, a steady stream of cuts has been rolled out by the country’s other mortgage lenders, including brokerages, non-bank lenders, and credit unions.
The ongoing threat of tariffs, coupled with a slowdown in the labour market, have also increased the odds of another quarter-point rate cut by the Bank of Canada next week.
“The Bank [of Canada] is now continuing to cut or is cutting on a more aggressive timeline than it otherwise would be as a form of insurance against the headwinds that are gathering strength as a result of what Trump’s doing,” explains David Larock of Integrated Mortgage Planners.
Larock adds that while the bond market is following a similar trajectory, fixed mortgage rates may not be as closely linked to bond yields as they typically are in more usual market conditions.
Why mortgage rates are trailing bond rates
CIBC, BMO, and TD’s recent rate adjustments are likely a response to drops in the 5-year Canada bond market, though these cuts have been delayed and tempered by short-term volatility.
After peaking at 3.29% in mid-January, bond yields plunged to a three-year low of 2.50% earlier this week, coinciding with the expected implementation of tariffs. However, they have since recovered to 2.69% following the latest delay in the tariffs, now set for April 2. Although bond yields have been trending downward since January, banks have only recently begun adjusting their fixed rates in response.
“If you’re in an environment where bond yields are going up and down, lenders aren’t going to respond to every grunt and groan of the bond market,” explains Larock. “We have been in a lower bond yield environment for some time now, and to me, this was a reflection of a long-term trend, not a short-term trend.”
Larock says in this volatile economic environment, banks are only reacting to sustained changes, suggesting there will continue to be delays between bond yields and fixed mortgage rates for the foreseeable future.
“What a lot of people don’t realize or appreciate is that while bond yields are falling, risk premiums are rising,” he explains. “So, when bond yields fall because of fears of an economic shock, fixed rates don’t respond as they normally would.”
Larock compares the current situation to the oil price crash of 2014 and 2015, which led the Bank of Canada to cut interest rates by half a percentage point in July 2015. This move caused 5-year bond yields to drop below three-quarters of a percent, though fixed mortgage rates didn’t immediately follow suit.
“There are parallels to what happened back then and what’s happening with bond yields now, because rates are stickier than people are used to seeing, and it’s all tied to the fact that it’s an economic shock,” he explains. “Quite frankly, in an environment like this, lenders aren’t going to fight over business because extending credit at a time of increased risk isn’t something they’re keen to do.”
Why banks are cutting mortgage rates now
Regardless of their pace relative to bond yields, fixed rates are starting to decline, but Larock cautions against taking it as a sign that banks are anticipating an active spring market. Instead, he suggests CIBC’s aggressive pricing is likely a reaction to the relatively weak mortgage origination performance in its most recent quarterly earnings.
“CIBC wants to be seen by the market as having the lowest rates of the banks, but the other banks aren’t going to lose business to CIBC, in my opinion and experience, because the rest will match it,” Larock says.
Others speculate that the banks are adopting a more aggressive approach, seeing this as the calm before a potential economic storm. By lowering rates, they hope to entice buyers off the sidelines before a full-blown trade war forces them back.
“It would have been a busier housing market this year, but because of what’s happening with tariffs, we’re going to see things slow down,” says Tracy Valko of Valko Financial. “We will have a blip of a busy period, and I think that’s coming now, but I think it’ll be short lived.”
If blanket tariffs are indeed forthcoming, Valko explains, it could cause steep job losses and a significant recession. In that scenario, this latest pause could prove to be the most active period in an otherwise quiet year for the housing market.
“With the expectation of slower mortgage activity, the banks are looking to be first to the gate with a competitive interest rate, so they get a flood of activity to help fill that pipeline,” she told Canadian Mortgage Trends.
Brokers are being left behind
With the big banks slashing fixed rates for prime borrowers, Valko says brokers—already recovering from a tough few years—are finding themselves in a difficult position.
“These bank branches are getting very aggressive on not only renewals, but purchases, and the spread between what the bank can offer, and the broker has become a lot larger,” Valko says. “We can buy down the rates on the broker side, but then the compensation spread is less, and we’ve already been in a slower market over the last two or three years.”
With competition over fixed rates heating up among the major banks, Valko is concerned that there will be less market share left over for brokers.
“We’re not going to have the mortgage activity that we were expecting and forecast for this year, so these banks will want to gain as much market share in a down-trending environment, and the same goes with brokers,” she says. “Brokers might have to be more competitive with taking less income, buying down rates and having less left for commission.”
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Last modified: March 7, 2025
