The following is a summary of some important points we have drawn from the above article which was produced by the Bank of Canada.

It is important to note that this article was produced with the intent of identifying ways that Bank of Canada’s monetary policy would have a greater impact on Canadians. In short, how the lowering of rates by the Bank of Canada could be translated more directly into savings for Canadians. This report looked very specifically at the Canadian Mortgage Market, and here are few conclusions:

  • Borrowers who use a mortgage broker will pay less than borrowers who deal with lenders directly.
  • Most Canadians treat their primary financial institution as a “one-stop shop” (universal bank) where they purchase the majority of their financial services and it is this consumer loyalty that allows Banks to charge their clients higher mortgage rates. The report stated that Banks offer larger discounts to new clients than to existing clients.
  • Discounted mortgage rates became common in the Canadian marketplace in the early 1990’s as there were many Trust companies active in the mortgage marketplace, thus forcing Banks to be more competitive. This discounting decreased significantly as Canadian Banks began purchasing Trust companies and merging them into their existing operations. Mortgage discounting has since become more popular in the market with the increased market penetration of Mortgage Brokers. Currently we are seeing the greatest level of mortgage rate discounting thanks to a significant increase in Mortgage Broker popularity.
  • Canadian Banks appear to be extremely slow to pass on any decrease in the Bank of Canada rates to their customers. Banks adjust their rates upward more quickly when there are upward cost pressures than downward when costs fall.
  • Consumers have different preferences and skills when shopping and bargaining for a mortgage. Lenders maximise their profits based on observing these preferences and skills.

This was a great report outlining some of the major pitfalls associated with dealing with a Lender directly. The article clearly indicates that consumers are better of dealing with Mortgage Brokers. If you would like a copy of the full report please contact


Word Document: Competition in the Canadian Mortgage industry

PDF of Full Report: Competition in the Canadian Mortgage industry full report