Canada's Condominium Magazine
Two major Canadian banks, Toronto Dominion Bank and Royal Bank of Canada, raised the benchmark 5-year mortgage rate. Other banks will likely match the move. Currently, Scotiabank, Bank of Montreal and CIBC are at 4.99% for the five-year posted rate, while Royal and TD climb to 5.14%.
The strong economy is one factor — as is the anticipated pending rate increase from the Bank of Canada — but mostly the rates were adjusted based on rates in the bond market. Many banks fund their mortgage loans out of the bond market, which has been moving higher. A five-year bond from the Canadian government topped two percent only last week.
The higher cost of borrowing may keep pressure upwards on the fixed mortgages. Banks are locked in to the rate for the term and have to anticipate the fluctuations.
Variable rate mortgages are less susceptible, except, of course, when the Bank of Canad raises rates.
Borrowers can often secure lower than posted rates based on credit history and other factors. New mortgage rules are coming into play this year — the so-called stress test rules — which may redefine who qualifies for a mortgage, but also who qualifies for lower-than-posted rates.
The Bank of Canada is expected, by analysts to raise rates next year.