Toronto-Dominion Bank’s chief executive officer has given his approval to Ottawa’s reaction to recent mortgage rate cuts.
At the bank’s annual general meeting Tuesday in Calgary, CEO Ed Clark was asked how he felt about federal Finance Minister Joe Oliver’s response to Bank Montreal’s decision to cut its five-year mortgage rate to 2.99 per cent.
Mr. Clark said he is “supportive” of the reaction, and added that governments should not be in the business of fixing prices. “I think that’s treacherous territory,” he said.
Rather than focus on rates themselves, Mr. Clark said he much prefers governments to focus on other measures to cool the market, such as shortening the maximum amortization period on a mortgage.
Broadly speaking, Mr. Clark added, “governments fixing prices hasn’t been a success” in any market.
For the time being, Ottawa’s new Finance Minister is taking a hands-off approach to the mortgage market and does not want to interfere in the rate-setting decisions of the banks.
“There’s a market, and [BMO] made its decision,” Mr. Oliver said the day after the bank slashed its rate to 2.99 per cent.
“The chief executive officer of the Bank of Montreal informed me about it. I listened to his explanation, his reasons. I reiterated what I just stated, which is the government is gradually reducing its involvement in the mortgage market,” Mr. Oliver added.
Mr. Clark also noted that any market share gains from lowering mortgage rates are likely to be short-lived. Both TD and Bank of Nova Scotia are both marketing rates below 3 per cent – albeit it for four-year mortgages whereas BMO’s is for five years – and Ontario’s largest credit union recently slashed its own five-year rate to 2.95 per cent.
Because so many lenders are copying each other, it’s hard for any of them to stand out.
Cutting rates “is a good thing for the consumer,” Mr. Clark said. “It’s not a sensible thing for the industry.”