The threat of higher fixed term mortgage rates became a reality this morning as the Royal Bank and TD Canada Trust announced significant hikes. The Laurentain Bank followed suit and it’s believed that other major lenders will quickly fall in line.
Effective tomorrow, the posted rate for a five-year closed mortgage climbs by six-tenths of a percentage point with all three lenders, the largest one-day rate hike since 1996. Shorter-term fixed rate mortgages will also increase as much as four-tenths of a percentage point.
Fixed term mortgage rates are impacted by five-year bond yields, which have been climbing in recent months. Still, as early as just last week major lenders have been aggressively competing for market share. Just last week, the TD dropped its ten-year fixed rate to its lowest point ever, 4.99 percent. Today’s announcement represents a sudden and sharp change that seems to have taken the market by surprise.
All three lenders are currently offering promotional rates on their five-year fixed product that range from 4.54 percent to 4.59 percent, but effective April 19 when new mortgage rules take effect buyers selecting terms of less than five-years, fixed or variable, will be required to qualify using the five-year posted rates. A Saskatoon home buyer who qualifies for $300,000 in mortgage debt based on the current posted rate of 5.25 percent amortized over 25 years, will see their maximum allowable mortgage drop to $283,000 at the new rate, assuming it’s still in effect on April 19.
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