Newspaper article The Canadian Press

Canadian Banks Raise Fixed Mortgage Rates, Variable Rates Could Soon Follow

Newspaper article The Canadian Press

Canadian Banks Raise Fixed Mortgage Rates, Variable Rates Could Soon Follow

Article excerpt

Big banks hike fixed mortgage rates

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Several Canadian banks have increased their fixed-rate mortgage rates amid rising yields on the bond market and a strengthening economy, changes economists said could have repercussions for the housing market.

As of Friday, Royal Bank of Canada, Toronto-Dominion Bank and CIBC said they had raised rates between 10- and 15-basis-points. The banks tend to move in lockstep when it comes to raising rates.

RBC's posted five-year fixed mortgage rate moved to 5.14 per cent on Thursday, up from 4.99 per cent. The bank's special offer rate for a five-year fixed mortgage with a 25-year amortization moved to 3.54 per cent from 3.39 per cent.

RBC (TSX:RY) said the changes reflect the activity of competitors, costs for funds on the wholesale markets, as well as other costs and market considerations.

TD (TSX:TD) raised its five-year fixed rate to 5.14 per cent, the first time it has been above five per cent since February 2014.

CIBC raised fixed mortgage rates by between 10 and 15 basis points, effective Friday "in response to market conditions." Its five-year fixed rate rose by 10 basis points to 4.99 per cent, while the one and two-year fixed rates moved 15 basis points to 3.29 per cent and 3.24 per cent, respectively.

Scotiabank (TSX:BNS) said it is reviewing its rates and will likely soon make changes. Bank of Montreal (TSX: BMO) did not immediately respond, while National Bank (TSX:NA) said it had not yet determined its plans.

If enough banks raise their rates by the same amount it will raise the benchmark rate for stress tests, said Gregory Klump, chief economist of the Canadian Real Estate Association.

"That would definitely have a marginal impact on how much mortgage people can qualify."

The changes appear to most immediately affect those whose mortgages are uninsured because they had a down payment of 20 per cent or higher.

The stress test for homebuyers who don't need mortgage insurance requires them to prove they can make payments at a qualifying rate of the greater of two percentage points higher than the contractual mortgage rate or the five-year benchmark rate published by the Bank of Canada.

Those with insured mortgages must qualify at the Bank of Canada benchmark five-year mortgage rate, which was posted at 4. …

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