Bloomberg News

Canada Mortgage ‘Wars’ Lead to Unacceptable Returns, McKay Says

March 29, 2012

Canada’s “hyper-competitive” mortgage-lending has depressed returns to unacceptable levels that aren’t likely to last, said David McKay, Royal Bank of Canada’s head of banking for the country.

“You hate doing business at 2.99 and making such low-to- negligible margins for five years,” McKay said today, referring to interest rates on some mortgages, during a conference in Montreal hosted by National Bank of Canada. (NA) “Some of those rate wars have taken these returns down to unacceptable levels for our shareholders.”

Bank of Montreal (BMO) reduced its five-year fixed-rate mortgage by 50 basis points to 2.99 percent on March 8, prompting Royal Bank and other lenders to discount some home loans. Royal Bank raised its four-year fixed mortgage by 50 basis points to 3.49 percent on March 26, ending its special offer.

“We’re hoping they don’t sustain there over time,” he said, referring to the market’s current levels. “And it appears that they won’t.”

To contact the reporter on this story: Doug Alexander in Toronto at

To contact the editors responsible for this story: David Scheer at; David Scanlan at

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