Banks aren't always matching lowest renewal rates despite popular belief

With Canada’s mortgage renewal wave already well underway – and high mortgage rates and economic uncertainty keeping a lid on purchase activity – top lenders are maintaining a strong focus on borrowers renewing.

But while leading banks are engaged in fierce competition for business, sometimes matching other lenders’ best rates to snag a customer, it’s not always the case that banks will lower their offer for renewal deals.

That’s according to Vincent Tong, principal and co-founder at DLC Clear Trust Signature Mortgages, who told Canadian Mortgage Professionalbrokers and borrowers shouldn’t assume that a bank will always be able to meet the best rate offer.

“We always tell the client what’s available right now: ‘Is this something that your bank can match?’” he said. “And funny enough, people always say that the bank will always 100% match it. That’s not true. We’ve actually had a few cases where the bank said, ‘No, we’re not going to match that offer. Take it or leave it.’

“And at that point, our value [as brokers] really comes in and we show the client that the bank’s not willing to do it. The buy-in for the client is much higher at that point because they’ve already tried the path of least resistance.”

Banks are eager to secure renewal business but still have their own guidelines to follow, Tong said, and can sometimes opt against matching a low rate for various reasons.

“Sometimes one bank will have a lower rate than the other, and that’s just how their treasury has priced their rates based on their bonds, based off their liquidity premiums, all those things,” he said.

“Whether their internal algorithm scores the client lower or they don’t have the ability… then they would just kind of tell the client, ‘Sorry, we cannot match that rate.’”

How brokers are tackling the renewal wave

Brokers have sometimes faced a difficult time competing with banks for mortgage renewals because of the banks’ ability to trim their offer.

For many brokers, playing the long game is the most sensible strategy: steering borrowers toward the bank if it’s genuinely their best option, and improving the broker’s chance of repeat or referral business in the future.

Tong said that around six out of 10 times, borrowers will renew with their existing lender. But other borrowers, unsurprisingly, are struggling with rates that have shot upwards since they first took out their mortgage during the COVID-19 pandemic, meaning a straight renewal simply isn’t an option.

“People are having trouble paying their mortgage with the rates going up maybe two, three times. Some people locked in at 1.45%, something like that,” he said. “A lot of times, there’s a lot of pressure to keep up with those payments.

“And we’ve had a few applicants come in and say, ‘You know what, I want to refinance, take out a little bit of money to help with payments or keep the mortgage amount the same and then re-amortize so my monthly liability is a little bit lower.’”

Still no sign of a crisis with renewal surge underway

Mortgage market watchers have had their eye on the 2025-26 renewal wave for some time, especially last year when the Bank of Canada had yet to cut interest rates and fears mounted of potential sharp pain for thousands of mortgage holders.

The central bank introduced a flurry of cuts starting last summer, providing at least a measure of relief for homebuyers – and a recent TD analysis suggested little chance of a mortgage meltdown amid the renewal surge.

Those lower rates have helped push aggregate mortgage payments downwards, TD economist Maria Solovieva wrote,  meaning there’s no chance of a huge shock to the financial system despite the earlier fears.

“Many homeowners have some flexibility to temper the increase in their monthly payment – whether it’s through extending the amortization, refinancing, or pre-paying,” Solovieva said.

Ultimately, higher payments resemble “a strain, but not an acute one,” she wrote. “In economic terms, most mortgage borrowers will manage, but with less financial flexibility.”

Source CMP
By Fergal McAlinden