The nation’s second-biggest bank just launched a killer variable mortgage rate. But keep it quiet. Apparently it doesn’t want everyone to know about it.

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Toronto-Dominion Bank’s new offer is 6.19 per cent for uninsured mortgages. That’s equal to Canada’s benchmark prime rate (7.20 per cent) minus a plump discount of 101 basis points (bps).

Side note: Above I’ve referenced the prime rate the Bank of Canada tracks, simply because that’s the standard. TD has its own “Mortgage Prime Rate,” however, which is 15 bps higher than virtually everyone else. TD arbitrarily lifted its mortgage prime rate in 2016 despite no Bank of Canada rate hike at the time — because who needs central bank hikes when you’ve got moxie?

How good is this deal?

TD’s deal is sizzling — for a variable rate anyway. It’s a cool 54 bps below the next lowest rate from a nationally advertising variable-rate lender. And it’s the best widely available uninsured variable discount since 2021.

“From time to time, we offer special rates to win more business,” a TD spokesperson said by email. “In this case we are offering a limited time, two week uninsured special to kick off the spring market.”

And then there’s the icing on the cake. Like most big banks, TD is throwing cash at mortgage customers — in this case, up to $4,100 worth of bonuses depending on your mortgage size. In present value, that’s like getting another 10 bps off the rate for five years.

This promo is good until end of day May 14. There’s no telling whether the bank will extend the sale, but it’s a clear harbinger of better variable discounts to come. 

Confusion guaranteed

TD confirms that the offer is available through both mortgage brokers and TD mortgage specialists.

The question is, three days into this rate sale, why is this stellar rate not on TD’s website? 

I directly asked the company why through official media channels but it declined to answer. And when a bank sidesteps such a straightforward question, odds are there’s something they’re trying to keep under wraps.

A TD insider speaking on background tells me that the bank may want to keep the rate low profile given potential heat from Ottawa. Policymakers don’t want to see anything inflame the housing market and debt levels. That’s especially true with inflation so far above target, borrowers more leveraged than a Cirque du Soleil act and housing dreadfully undersupplied (and for that matter, over-demanded thanks to our loose immigration gatekeepers). 

Apart from trying to hoodwink unsuspecting customers into paying higher rates than informed customers, there are few other reasons why a bank would hide such an amazing rate from the public.

As a side note, I randomly mystery shopped two TD mortgage specialists and one told me she could get me the rate “on exception” and another said the rate doesn’t even exist. Seems the bank’s retail reps aren’t all on the same page. 

If you want more certainty and perhaps an even better discount — given some brokers “buy down rates” using their commission — you may want to try a TD-approved broker instead.

Regardless, in the age of 24/7 media and tweetstorms, everyone can find out what you’re doing as a bank, including regulators. Maybe it’s time banks skipped the masquerade and embraced transparency — good for PR if nothing else.

Of course, TD is not alone in playing coy with its best rates. All the big banks play these games — i.e., refuse to show their lowest rates publicly — because it’s more profitable for them that way. It irks the hell out of people but it’s the way banks roll in this country.

Payment flexibility

TD’s variable allows customers to fix their payments to protect their budget against the possibility of rising rates. The fixed payment also accelerates your mortgage payoff if rates drop, since more of each payment goes to principal.

But many don’t want a fixed payment in a falling rate environment. As the Bank of Canada starts chopping rates, which is expected to begin by July, many customers will prefer an adjustable rate mortgage (ARM) instead. That’s where your payment drops as the prime rate falls.

Fortunately, TD allows variable borrowers to call in and request a payment drop, so long as doing so doesn’t extend their originally scheduled amortization. So, essentially TD gives you the best of both worlds — protection from the chance of surging rates, and the ability to accelerate your amortization or lower your payment as rates dip.

Hybrid option

Got 20 per cent equity and not jazzed about riding the variable rate roller coaster? TD’s “FlexLine” option lets you split your borrowing into part fixed and part variable. 

For example, a FlexLine borrower could choose half in a five-year variable at 6.19 per cent (TD Mortgage Prime minus 1.16 percentage points) and half in a five-year fixed in the low five per cent range. 

That lets you hedge your interest rate exposure in the less likely event variable rates average higher than fixed rates over the next five years. And by “less likely,” I mean according to forward rates in the bond market, which traders use for rate speculation and hedging purposes.

Having part of the mortgage in a floating rate also reduces prepayment penalties if you have to break the mortgage early. 

As the first major rate sale of the spring, TD’s variable special tosses a firecracker into the spring housing market. No doubt it’ll encourage other banks to sharpen their pencils, particularly Royal Bank of Canada, which is locked in a heated battle with TD for the title of Canada’s biggest mortgage lender.

The takeaway is that TD is doing variable-rate borrowers a solid here, and when banks compete, consumers win. Now, let’s grab our financial popcorn and see if a potential rate war and the Bank of Canada’s magic rate scissors give home prices an adrenaline shot.

Robert McLister is a mortgage strategist, interest rate analyst and editor of MortgageLogic.news . You can follow him on X at @RobMcLister.

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