The second mortgage war of the year in Canada is coming to an end. BMO’s offer is set to expire tomorrow and so far, two of the other major banks have already followed suit. While the cheap mortgages are still on offer at TD Bank and RBC until Thursday, after that the rates are going up. And just like last time, it’s the rising cost of bonds that have forced them to do it.
RBC (Royal Bank of Canada) has announced that their low rates of 2.99% on four-year fixed mortgages will rise to 3.49% on Friday, while TD Bank has said that they too, will be pulling their cheap mortgages off the table as of Thursday with the new rates going into effect on Friday. And while the Bank of Nova Scotia didn’t make the grand announcement that RBC and TD did, they too were speaking to mortgage brokers last week, telling them that they can also expect the rate to rise. The variable rate is also changing at the banks, going up 20 basis points on five-year closed variable rates.
The banks have all stated the rising cost of bank bond yields as the reason for the increase in rates, and Doug Porter, deputy chief economist at BMO, agrees saying, “It does look like the tide has turned on the bond market. We’ve had a number of sell-offs over the years in the bond market and the bull market has come running back with a vengeance so you never want to say never. It does seem like things have shifted.” But, not every bank makes themselves so susceptible to what the bank bond yields are doing. Homeowners that still want to get extremely cheap rates on their Toronto mortgages can still go to other lenders, such as credit unions, that are still offering five-year fixed rate mortgages at below 3%.
The rise in rates will most likely have some effect on the spring housing market, a time that is usually one of the hottest and most active. But even though they’ve risen, the rates are still very low so it’s hard to say just how much the newer rates will dampen the market, if at all. Add to that the fact that the weather this winter and spring in Canada has been hitting record levels, getting people out into the market early, and it’s really hard to say if the lift on mortgage discounts is going to have that much of an impact on all.
Mr. Porter doesn’t think it will saying, “Historically when potential buyers get a whiff that things may be shifting on the interest rate landscape, it often pulls anybody on the fence off of the fence.”
