Mortgage rates have finally begun to rise from their record lows,
with news Monday that Royal Bank and TD Canada Trust are increasing
several fixed mortgage rates by up to 6/10ths of a percentage point.
The biggest jump is attached to the popular five-year fixed closed
rate, which moves from 5.25 per cent to 5.85 per cent at both banks.
That's the posted rate, which is routinely discounted by the big banks.
RBC's new discounted rate for the five-year term also rises 6/10ths
of a percentage point to 4.59 per cent. TD's rises the same amount to
4.55 per cent.
Both
banks also raised their three-year and four-year fixed closed rates.
The posted three-year rate at Royal Bank climbs one-fifth of a
percentage point to 4.35 per cent, while the posted rate at TD jumps
4/10ths of a point to 4.70 per cent.
The posted four-year rate at both banks jumps 4/10ths of a percentage point to 5.34 per cent.
Other banks are expected to follow suit. The new rates, effective
Tuesday, represent the first hike in Canadian mortgage rates since last
October. The posted five-year rate is now back to where it was for much
of last summer.
New mortgage rules that go into effect next month require borrowers
to qualify at the five-year rate, rather than the old three-year
standard, even if they are applying for a variable rate mortgage.
Variable rates expected to rise soon
Variable
mortgage rates, which rise in tandem with the Bank of Canada's key
overnight lending rate, are not affected by Monday's announcement. But
they are likely to be heading up soon too.
Bank of Canada governor Mark Carney warned last week that inflation
was higher than expected. That had some market watchers forecasting
that the central bank could move to raise its key lending rate as early
as June. The possibility of an earlier rate hike sent bond yields up,
and that appears to have prompted Monday's mortgage increase. Fixed
mortgage rates tend to move higher when long-term bond yields rise.
The key rate has been at a rock-bottom 0.25 per cent since April 2009 to help the economy recover.
A report out Monday from CIBC World Markets said rising rates
shouldn't be enough to derail the stock market rally — pointing out
that the market is historically strong six months before and after rate
increases.
